stock price reactions as surrogates for the net cash flow effects of corporate policy decisions abstract this paper adopts a rational market structure to examine the link between the cash flow effects of management policy decisions and the resulting stock price reactions the focus is on testing cross sectional associations between cash flow effects and the underlying characteristics of affected firms we find that it is not possible to infer the sign of association between the stock price reaction and any characteristics of the firm that are observable before management announces its decision our methodological suggestions involve exploiting either a priori assumptions or sample information about the probability distribution of unobservable decision variables underlying the management decision process

instability in short run adjustments to purchasing power parity results for selected latin american countries according to the theory of purchasing power parity ppp there is a tendency toward equalization of different countries price levels in common currency terms however even assuming that a long run ppp relationship exists its relevance for policy makers in less developed countries ldcs will depend not only on the average speed of adjustment toward this relationship but also on the variability of such short run adjustments we present evidence of extreme volatility in adjustments toward ppp for four latin american countries based on time varying parameter estimates of error correction models

doubts about the mckinnon standard f or over ten years ronald mckinnon has advocated a new monetary system centered on fixed exchange rates between the japanese yen the german mark and the u s dollar unperturbed by the collapse of the fixed exchange rate system in 1971 73 mckinnon was already arguing in 1974 for new monetary arrangements based on rigidly fixed rates but built on stronger foundations world monetarism rather than national monetary discretion mckinnon 1974 since then he has refined his plan for monetary integration under rigidly fixed exchange rates a gold standard without gold as he recently called it mckinnon 1987b his proposal has fallen on fertile soil because the dramatic volatility in exchange rates makes the financial press and the business community grasp for ready answers mckinnon s scheme seems to solve the problem of currency instability and to judge from his presentation there are only merits and not one shortcoming in fact however there is little theoretical or empirical basis for his standard to support this criticism i will summarize first several of mckinnon s key propositions and prescriptions and then review these in a critical spirit proposition 1 the belief that real exchange rates affect the current account is a false doctrine real expenditure changes triggered by exchange rate movements offset gains in competitiveness current account imbalances should be adjusted by fiscal policies not real exchange rates proposition 2 fixed exchange rates are superior to flexible exchange rates as a means of adjusting to real disturbances and to achieve price stability

the information content of security prices a second look abstract beaver lambert and morse 1980 employ a regression of percentage change in prices on percentage change in earnings in which data are grouped by the dependent variable reverse regression offers a more intuitive and direct way to assess the information content of security prices the objective of beaver et al while grouping is asymptotically equivalent reverse regression is a more efficient way of examining the incremental explanatory power of lagged values of percentage change in price with respect to accounting earnings

chinese resource demand and the natural resource supplier this article provides empirical evidence on the effects of chinese resource demand on the resource rich natural resource supplier using the example of australia a structural var model is used to examine the effects of chinese resource demand commodity prices and foreign output on the macroeconomy with a formally specified mining and resource export sector the key findings of the article are that shocks to chinese demand and commodity prices result in a sustained increase in commodity prices and mining investment and a positive impact on the resource sector however these shocks eventually lead to lower real domestic output with factors of production moving out of the nonresource sectors and into the resource sector resulting in a fall in nonresource sector output which is not fully offset by the rise in resource sector output the results also indicate some market power by the natural resource supplier

equilibrium real exchange rates closed form theoretical solutions and some empirical evidence abstract this paper generates closed form theoretical solutions for the relationships among the real exchange rate relative per capita consumption and relative wealth in a stochastic dynamic general equilibrium model of two countries representative consumers the solutions offer insight into the robust cross sectional relationship between relative per capita gdps and relative national price levels established in kravis and lipsey 1983 1987 1988 in a manner consistent with equilibrium exchange rate theories and the productivity differentials model of balassa 1964 and samuelson 1964 application of panel data from summers and heston 1988 to the model s structural equations yields economically plausible estimates of the elasticity of intertemporal substitution the relative importance of nondashtradables in consumption and the rate of time preference in several oecd countries relative to that in the united states

the interaction of foreign exchange and market power effects on german domestic prices this paper illustrates the importance of international influences on domestic markets a model is presented in which changes in a country s terms of trade pass through to industrial prices in varying degrees depending on import penetration and seller concentration empirical results suggest that the 8 4 percent decline in the real external value of the deutsche mark from 1977 to 1983 allowed upward movement of about 2 percent in domestic producer prices of traded goods relative to the gnp price deflator increased market concentration led to a reduced effect while increased import penetration led to some increase in the exchange rate passthrough standard industrial organization models stress the impact of market power and entry conditions on economic performance with particular interest in price effects at the industry level greater concentration is expected to lead to higher prices ceteris paribus while greater ease in entry or a larger competitive fringe implies lower prices the international economics literature indicates that in the absence of trade barriers transactions and transportation costs and market power foreign exchange rate changes will be fully passed through to import and export prices implying that domestic prices of traded goods for an appreciating currency will be adjusted downward by the full amount of the exchange rate change the dramatic changes in exchange rates since the early 1970s provided exporters with new opportunities to enter markets of nations that had a strong currency west germany has been regarded as one such country this paper investigates the effect of exchange rate movements on particular german industrial prices i test to see whether the prominence of imports

exchange rate economics 1986 in the past fifteen years key exchange rates have moved in larger and more persistent ways than advocates of flexible rates in the late 1960s would have left anyone free to imagine certainly there was no expectation of constancy for nominal exchange rates but real exchange rate movements of 30 or forty percent were definitely not suggested as a realistic possibility moreover where these large movements did occur they did not obviously appear to be connected with fundamentals and hence seemed difficult to explain in terms of the exchange rate theories at hand the persistence of rate movements was as surprising as the rapid unwinding of apparent misalignments when they did ultimately occur the past fifteen years provide a natural dividing line between the keynesian and monetary approaches of the 1960s and the more recent analysis that takes into account exchange rate expectations and portfolio issues which took off in the early 1970s as well as the brand new approaches that concentrate on partial equilibrium microeconomics to review these ideas the paper starts with a brief look at the u s experience with flexible exchange rates from there it proceeds to the mundell fleming model as a comprehensive framework of analysis the following sections deal with persistent effects of policy disturbances links between exchange rates and prices the political economy of exchange rate movements and the question of policies toward excess capital mobility this abstract was borrowed from another version of this item

security analyst superiority relative to univariate time series models in forecasting quarterly earnings abstract this paper provides evidence of security analyst sa superiority relative to univariate time series ts models in predicting firms quarterly earnings numbers and shows that sa forecast superiority in our sample is attributable to 1 better utilization of information existing on the date that ts model forecasts can be initiated a contemporaneous advantage and 2 use of information acquired between the date of initiation of ts model forecasts and the date when sa forecasts are published a timing advantage

controlling stochastic pollution events through liability rules some evidence from ocs leasing under the ocs lands act firms are strictly liable for damages from oil spills to the extent that this liability rule causes firms to internalize environmental risks incentives for damage avoidance behavior are provided using data from the 1979 georges bank lease sale we use a robust estimation technique to test the hypothesis that potential environmental costs are reflected in bids for ocs leases the results indicate a substantial response to environmental risks recognizing reduced rents we estimate that total high bids have declined by 20 because of firms perceptions of environmental risks the results suggest that liability rules have considerable potential in controlling stochastic pollution events

in search of the exchange risk premium a six currency test assuming mean variance optimization abstract a number of authors examining deviations of actual rates of currency depreciation from forward discounts have claimed to find evidence of risk premiums if these deviations are indeed partly due to risk premiums rather than being entirely due to expectational errors then they should be systematically related to those variables on which risk premiums are thought to depend finance theory tells us that if investors optimize with respect to mean and variance the risk premium depends in a specific way on 1 the supplies of assets denominated in the various currencies 2 the variance covariance matrix of the rates of return and 3 the coefficient of risk aversion the null hypothesis of this paper is that the coefficient of risk aversion is zero countries assets are perfect substitutes and risk premiums are nonexistent the alternative hypothesis is that rates of return are systematically related to asset supplies by a macroeconomic portfolio balance function the maximum likelihood technique used dominates previous attempts to find such a relationship in that the parameters of the portfolio balance function are constrained to depend on the variance covariance matrix as the finance theory says they should on the other hand the technique also dominates previous applications of the finance theory in that the expected returns are allowed to vary over time as the macroeconomic portfolio balance theory says they should the paper s finding is a statistical inability to reject the null hypothesis for a portfolio of six currencies although this could be due to low power in the test

the valuation impacts of specially designated dividends this paper examines the valuation impacts of specially designated dividends sdds by analyzing the behavior of stock and bond prices on dates surrounding their announcements the evidence presented here suggests that sdds are considered positive signals by the market with most of the gains associated with their announcements accruing to stockholders in addition we present some evidence that the gain to stockholders is negatively related to the frequency of sdd announcements

environmental bonds and environmental research in innovative activities abstract this paper considers the incentive to uncover potential future social costs of activities having no historical precedents since ex ante markets in the future external effects of historically unique activities are non existent the private incentives to uncover the possibility of thalidomide type results in such activities is weak the paper discusses the value of sequentially determined environmental bonds as mechanisms for the generation of research funds in these cases and derives measures for the calculation of such bonds

insurance fraud and optimal claims settlement strategies abstract we examine the optimal claims settlement strategy for a liability insurer when claimants can permanently misrepresent their losses by engaging in costly claims falsification in this environment claims auditing is not a possible deterrent to fraud and the settlement strategy consists of an indemnification profile that relates the insurance payment to the claimed amount of loss the optimal indemnification profile is shown to involve systematic underpayment of claims at the margin as a means to deter loss exaggeration with the extent of underpayment limited by expected litigation costs and potential bad faith claims the key testable implication of the theory is that the extent of underpayment should be greater for classes of claims for which loss exaggeration is easier empirical analysis of insurance settlements for bodily injury liability in automobile accidents confirms this prediction this suggests that liability insurers optimally choose claims payment strategies to lessen a claimant s i

bond and stock market response to unexpected earnings announcements this study examines whether earnings changes convey information in bond markets and finds a significant positive negative reaction to unexpected earnings increases decreases the results are consistent whether earnings announcements precede or follow dividend announcements thus earnings surprises convey information to bond markets and changes in firm value are split among bondholders and stockholders this is in contrast to evidence from studies examining unexpected dividend announcements where bond price reaction is asymmetric cross sectional analysis reveals that bond excess returns are positively related to earnings surprises i introduction stock market reaction to earnings announcements has received significant attention in the finance and accounting literature ball and brown 1968 brown 1978 watts 1978 aharony and swary 1980 and fried and givoly 1982 are some ofthe studies that observe a revision of stock prices associated with the release of earnings information lev 1989 provides a survey of research in this area the explanation for the above empirical findings is that unexpected earnings provide new information about future cash flows furthermore the classical discounted cash flow model predicts a revision in firm value that is the present value of expected future cash flows whether this increased firm value accrues to stockholders and bondholders is an empirical issue past research on the information content of earnings has focused solely on stock price behavior and finds at least part of the benefits accrue to stockholders in this study we examine the bond market reaction to unexpected quarterly earnings announcements the study is unique for several reasons first dividends repurchases and earnings are eonsidered primary mechanisms used by manage ment to convey information about future cash flows to securityholders recent

capital market integration abstract liberalization in the ec in 1992 should produce perfect capital market integration to show the short and long run effects of perfectly integrated capital markets we develop a tractable growth model where investment flows to earn the highest rate of return the economy first goes through potential and then actual integration before and after rates of return are equalized we show relative changes of capital intensities outputs per capita rates of return and the real exchange rate during both stages of integration

endogenous changes in the exchange rate regime a bureaucratic incentive model public choice submits that legal changes can be endogenous in such a way that they are manipulated by bureaucrats who want to maximize rents from transactions with various interest groups this paper takes the change in exchange rate regimes to empirically examine the premise it offers a two stage method in which we first show that the exchange rate is influenced by interest group pressures and subsequently that the 1990 market average regime mar as a phase in policy in korea was introduced mainly to serve bureaucratic incentives this method is expected to be useful to a host of countries for various studies attempting to test a possible existence of bureaucratic or other hidden motivations behind any isolated event of policy change

the stock market and exchange rate dynamics abstract this paper articulates a model of the open economy in which as in tobin 1978 the price of shares in the stock market subtitutes for the real interest rate in the determination of aggregate demand the stock market reduces the impact of monetary policy on the real exchange rate indeed if the link between stock prices and aggregate demand is important enough the impact of monetary policy on the real exchange rate can be reversed in contrast with standard dynamic mundell flemming models anticipated fiscal policy can be expansionary rather than contradictionary as in for example burgstaller 1983 blanchard 1984 and branson et al 1985

the exchange rate and the u s wage process an intensive empirical investigation the u s wage growth slowdown since 1982 has generated a large controversy over its causes a hypothesis that has received extensive attention is based on international competitivene ss effects the evidence is mixed and several authors have proposed alternative hypotheses based on economic or noneconomic developments this paper addresses this issue and finds significant effects of international competition on wages in manufacturing services and total hourly private earnings an array of tests indicates that thes e results are robust but that the depreciation of the dollar after 198 5 has not had the large effects of the 1981 85 appreciation copyright 1993 by ohio state university press

an empirical test of the comparative and contributory negligence rules in accident law scholars in the field of law and economics have developed an extensive theoretical literature on the effects of liability rules in accident law but have done little testing of their theoretical models in this article i develop an empirically testable model of the incentives for injurers and victims to avoid accidents under both the older contributory negligence rule and the newer rule of comparative negligence the model takes account of the fact that in the automobile accident context drivers do not know in advance with whom they will be involved in an accident and whether they will be the injurer or the victim or both it also allows for uncertainty in legal decision making the model is tested using a data set of rear end automobile accidents litigated in court the results suggest first that incentives to take care to avoid accidents are stronger under the contributory negligence rule than under the newer rule of comparative negligence and second the incentives set up by the comparative negligence rule for drivers to avoid accidents are weaker than is economically efficient

the zero interest rate bound and the role of the exchange rate for monetary policy in japan in this paper we study the role of the exchange rate in conducting monetary policy in an economy with near zero nominal interest rates as experienced in japan since the mid 1990s our analysis is based on an estimated model of japan the united states and the euro area with rational expectations and nominal rigidities first we provide a quantitative analysis of the impact of the zero bound on the effectiveness of interest rate policy in japan in terms of stabilizing output and inflation then we evaluate three concrete proposals that focus on depreciation of the currency as a way to ameliorate the effect of the zero bound and evade a potential liquidity trap finally we investigate the international consequences of these proposals

the price of negligence under differing liability rules although economics journals have been filled with theoretical articles about the effects of various negligence rules on allocative efficiency there have been no econometric studies on whether juries act according to the standards implied by the various liability rules if juries do not act accordingly then the actual allocative effects of a particular liability rule can vary greatly from the theoretical predictions because those who are subject to liability for example automobile drivers will face expected losses different from the theoretically determined ones in this paper i first develop hypotheses concerning the interrelationship of liability rules jury decision making and litigant behavior and then test these hypotheses using data from 582 civil cases involving rear end automobile accidents in california during 1974 76 in a sense jury trials are the ultimate arbiters in all personal injury cases while some trials involve only a judge and many cases are negotiated out of court both sides always have the option of going to ajury trial the expected behavior of juries therefore sets the boundaries within which negotiated settlements take place for example if the jury is expected to award the plaintiff 100 000 the plaintiff will not accept a negotiated settlement of 2 000 if juries tend to award more than judges do then plaintiffs will tend to opt for juries if juries tend to award less than

new evidence on the valuation effects of convertible bond calls this study examines the wealth effects of convertible bond call announcements on stock holders straight bondholders and called and non called convertible debtholders we docu ment that forced conversions are associated with a significant loss in firm value the results suggest that convertible call announcements can trigger both negative signal and wealth transfer effects we show that at least part ofthe negative effect on stock prices results from wealth transfer to straight bondholders our analysis also lends empirical validity to the common contention that called convertible bondholders suffer wealth expropriation due to the elimination ofthe premium the wealth effect on non called convertible debtholders is insignificant cross sectional analysis reveals that the negative signal effect is important in explaining bond stock and firm excess returns finally we present evidence that refutes the notion that bonds are called to relieve the firm from restrictive debt covenants

sell side debt analysts and debt market efficiency we explore sell side debt analysts contributions to the efficiency of securities markets we document that debt returns lag equity returns less when debt research coverage exists which is consistent with debt analysts facilitating the process by which available information is impounded in debt prices the effect of debt research on the debt market s lag is incremental to but comparable in magnitude to hedge fund ownership s effect no such effect exists for credit rating agencies we also find that the dissemination of debt reports has an immediate effect on return volatility in both markets which is consistent with debt analysts providing new information to securities markets increased return covariation suggests that this information impacts the pricing of debt and equity in the same direction a large percentage of debt reports do not induce any immediate debt market return reaction but do induce an equity return reaction which is consistent with new information being provided despite the absence of a debt market reaction finally there is a systematic variation in the debt market s trading and return reactions to debt research timely reports and those by high reputation brokers induce a quicker trading response thus enhancing liquidity whereas only timely reports induce a greater return response this study illuminates the institutional underpinnings of debt market efficiency and it has important implications for information content tests in the debt market where trading is limited

governing uncertain and unknown effects of genetically modified crops this paper analyzes the capabilities of three different governance regimes for adequately handling uncertain and unknown effects of genetically modified gm crops adequate handling requires the development of sound procedures for identification of uncertainty and ignorance ui gm crops are produced by private firms and the government decides whether the crops should be marketed gr2 and gm crops are produced and the government decides whether the crops should be marketed gr3 the effect of bringing the civil society into the decision making process is also analyzed gr3 will be stronger in cooperative adaptation and communicative rationality than gr2 public research organizations have fewer conflicts of interest with the government than private firms and academic norms are important difficulties in proving harm and identifying the responsible firm will make gr1 weak in cooperative adaptation and communicative rationality

litigation liability and incentives for care abstract in this paper potential injurers are subject to a negligence standard and differ in cost of taking care in the event of accident the injurer s degree of care is private information in litigation that follows award of damages for pain and suffering will lead to a general increase in care and hence reduce the likehood of accident a tighter negligence standard will lead some potential injurers to take more care and others to take less adoption of a rule under which the loser at trial must pay the litigation costs of the winner will reduce the pressure for punitive damages

exchange rate economics is always and everywhere controversial abstractthis article reviews the major developments in the recent literature on exchange rate economics it is argued that the link between the exchange rate and economic fundamentals is breaking new ground evidence indicates that alternative analytical frameworks such as the new open economy macroeconomics and exchange rate arrangements such as the euro have their theoretical and analytical elegance but are proving empirically very difficult to implement the role of methodological advances and alternative fundamental instruments such as world commodity prices is also highlighted

dual exchange rates capital controls and sticky prices abstract it is often argued that capital controls are an appropriate policy response to the exchange rate overshooting which occurs when asset markets adjust more rapidly than goods markets in this paper an intertemporal disequilibrium model of an open economy is developed in which the effect of capital controls is examined the results are contrasted with recent studies by adams and greenwood 1985 and obstfeld 1986 in which capital controls are evaluated within a purely equilibrium framework and thus inevitably take the form of a welfare reducing distortion

the use of technical analysis in the foreign exchange market abstract technica or chartist analysis of financial markets involves providing forecasts or trading advice on the basis of largely visual inspection of past prices without regard to any underlying economic or fundamental analysis this paper reports the results of a questionnaire survey conducted on behalf of the bank of england among chief foreign exchange dealers based in london in november 1988 amongst other findings it is revealed that at least 90 per cent of respondents place some weight on this form of non fundamental analysis when forming views at one or more time horizons there is also a skew towards reliance on technical as opposed to fundamentalist analysis at shorter horizons which becomes steadily reversed as the length of horizon considered is increased a very high proportion of chief dealers view technical and fundamental analysis as complementary forms of analysis and a substantial proportion suggest that technical advice may be self fulfilling jel f31

environmental impairment liability as an instrument of environmental policy abstract this paper evaluates the role of liability that may arise in the context of an impairment of the environment environmental impairment liability or eil for short is analyzed as an instrument of environmental policy interrelationships between injurers victims the legal system insurers and the environment serve to show that eil may contribute to preserve the environment however peculiarities such as mass torts and uncertain behavior of courts serve to detract from the effectiveness of eil the question arises of whether these shortcomings are 1 mitigated or exacerbated by eil insurance the potential contribution of insurance to eil is found to be undermined by partial market failure which however can be alleviated by permitting the flotation of environmental risk warrants on capital markets

a flexible assurance bonding system for improved environmental management abstract current methods of regulating activities that are known or suspected to be environmentally danaging are not working well they induce legal confrontation obfuscation and government intrusion into the inner workings of firms they tend to suppress technical and social innovation aimed at long term solutions they do not mesh well with the market signals that firms use to make decisions this paper discusses some of the underlying reasons for this problem and outlines a flexible environmental assurance bonding system designed to incorporate environmental criteria and uncertainty into the market system and to induce positive environmental technological innovation in addition to direct charges for known environmental damages an assurance bond equal to the current best estimate of the largest potential future environmental damages would be levied and kept in an interest bearing escrow account the bond plus a portion of the interest would be returned if and only if the firm could prove that the suspected damages had not occured or would not occur if damages did occur the bond would be used to rehabilitate or repair the environment and to compensate injured parties by requiring the users of environmental resources to post a bond adequate to cover potential future environmental damages with the possibility for refunds the burden of proof is shifted from the public to the resource user and a strong economic incentive is provided to research the true costs of environmentally innovative activities and to develop innovative cost effective pollution control technologies

fault settlement and negligence law state tort laws that govern the apportionment of damages from accidents often bar potential plaintiffs who played even a minor causal role in the accident from recovering damages from other culpable parties however anecdotal evidence suggests that judges and juries fail to enforce the letter of the law which leads to a weaker relationship between fault in an accident and recovery for injuries than the laws would predict data from insurance settlements arising out of auto accidents are consistent with the anecdotal evidence this indicates that the letter of the law may be less important in shaping individuals behavior than scholars have supposed

a note on fiscal policy investment location decisions and exchange rates abstract the paper argues that trade balances and exchange rates may be quite responsive to changes in the relative attractiveness of locating production facilities or storing other taxable forms of wealth in different countries this suggests that there are at least three important channels through which fiscal policy changes may be transmitted to exchange rates it is argued that a country oriented analysis of asset choice as distinct from the traditional currency oriented portfolio balance framework may be important for understanding the behavior of exchange rates

changing rules in tort law and the market for childhood vaccines much attention has been focused on the changes in the legal environment that have swept this country in the past two or three decades one of the more important changes has been the movement toward strict products liability although this evolution has not been complete in many cases it has become much easier for injured consumers to obtain compensation from manufacturers the increased availability of compensation made possible by this evolution has been hailed as a great victory for consumer interests assailed for its economic inefficiency and blamed for increasing the costs and risks of engaging in business and thus causing a decline in the competitiveness of american industry 1 while there exists a well developed theoretical literature on the relative efficiency of alternative liability rules 2 little reliable evidence has yet been generated on the actual consequences of this evolution 3 it is to this issue that this article is addressed the evidence generated here comes from the market for childhood vaccines a market which is particularly

when does the bond price reaction to earnings announcements predict future stock returns abstract in this paper i show that the bond price reaction to earnings announcements has predictive power for post announcement stock returns and that this predictive ability is driven by the bonds of non investment grade firms i find that bonds predictive ability is more pronounced in firms that have a lower level of institutional shareholder ownership and whose bonds are more liquid this paper enhances our understanding of the relation between the stock and bond markets and complements the literature which documents whether and under what circumstances various accounting based measures and financial statement components predict post announcement stock returns

financial analysts forecasts of earnings a better surrogate for market expectations abstract the specification of the market expectation of accounting numbers is a common feature of many empirical studies in accounting and finance givoly and lakonishok 1979 found that financial analysts forecasts have information content this study evaluates the quality of analysts forecasts as surrogates for the market expectation of earnings and compares it with that of prediction models commonly used in research results indicate that prediction errors of analysts are more closely associated with security price movements suggesting that analysts forecasts provide a better surrogate for market expectations than forecasts generated by time series models the study also identifies factors that might contribute to the performance of the financial analysts forecasts the broadness of the information set employed by analysts and to a lesser extent their reliance on information released after the end of the fiscal year appear to be important contributors to their performance

takeover defenses and wealth effects on securityholders the case of poison pill adoptions abstract this is the first study to examine the valuation effects of any antitakeover amendment on both bondholders and stockholders we present new evidence documenting that on average there is a significant wealth loss experienced by bondholders at poison pill adoption announcement while stockholders are unaffected our finding of significant bondholder losses is consistent with the proposed negative signal hypothesis we document results which indicate that bondholders correctly anticipate the degree of leverage increase at the time of the announcement we also show that the proportion of insider ownership is negatively related to bondholder wealth effect at announcement this supports the notion that higher insider manager ownership leads to a greater alignment of manager stockholder interests while increasing the stockholder bondholder agency costs long run analysis of leverage and performance measures reveal that pill adopting firms are not under leveraged as compared to their industry rivals however supporting the negative signal hypothesis the leverage of sample firms rises significantly after the pill adoption performance measures reveal that sample firms significantly underperform their industry cohorts this result suggests that poison pill adoptions are motivated by poor managers attempting to immunize themselves from the disciplinary actions of the corporate control market

an empirical test of the redistribution effect in pure exchange mergers merger transactions involve differing degrees of change in capital structure and asset distribution as a result different forms of merger could have different effects on security values of the firms involved previous empirical studies primarily used samples that included all types of mergers the present study examines the effect of one type of merger pure stock exchange on the values of the debt and equity of the firms involved

uniformity versus differentiation in regulating externalities abstract in the regulation of pollutant emissions a regulator may treat different sources with different costs and environmental damage as though they were the same for institutional informational or transaction cost reasons this may occur despite the efficiency gains from regulatory differentiation of sources this issue has been a source of much controversy in the environmental economics literature and is examined here from a theoretical perspective using a two pollutant economy emissions and net social benefits are compared for the case of efficient differentiated regulation and the case of uniform undifferentiated regulation of the aggregate of the two pollutants we show when aggregate emissions will be greater than equal to or less than efficient emissions and we derive conditions for each of these three possibilities further we show that when marginal costs and benefits become more steeply sloped the inefficiency associated with undifferentiated regulation increases

the use of fundamental and technical analyses by foreign exchange dealers hong kong evidence abstract this article reports the results of a questionnaire survey conducted in february 1995 on the use by foreign exchange dealers in hong kong of fundamental and technical analyses to form their forecasts of exchange rate movements our findings reveal that 85 of respondents rely on both fundamental and technical analyses for predicting future rate movements at different time horizons at shorter horizons there exists a skew towards reliance on technical analysis as opposed to fundamental analysis but the skew becomes steadily reversed as the length of horizon considered is extended technical analysis is considered slightly more useful in forecasting trends than fundamental analysis but significantly more useful in predicting turning points interest rate related news is found to be a relatively important fundamental factor in exchange rate forecasting while moving average and or other trend following systems are the most useful technical technique

the price of gold and the exchange rate abstract this paper examines the theoretical relationship between the major exchange rates and the prices of internationally traded commodities in the empirical section the case of gold is analyzed using forecast error data among other things it is found that since the dissolution of the bretton woods international monetary system floating exchange rates among the major currencies have been a major source of price instability in the world gold market and as the world gold market is dominated by the european currency bloc appreciations or depreciations of european currencies have strong effects on the price of gold in other currencies