analysts and information gaps lessons from the ual buyout in addition to earnings forecasts and stock recommendations analysts provide potentially useful information to investors in the form of written commentary and analysis but how such fundamental research affects stock prices has been little studied i investigate the role analysts research played in the 1994 restructuring of ual corporation parent of united air lines in which employees acquired 55 percent of ual stock in exchange for 4 9 billion in wage benefit concessions focusing on the critical first two years of the buyout my analysis suggests that analysts and investors on average initially gave the company little credit for the concessions the transaction was controversial and complicated most analysts were negative or indifferent in their assessment of the deal some analysts also misinterpreted key terms of the deal ual managers responded by reporting an unconventional earnings measure that highlighted the financial concessions ual s stock price relative to the market and industry eve

the institutional causes of china s great famine 1959 1961 this paper studies the causes of china s great famine during which 16 5 to 45 million individuals perished in rural areas we document that average rural food retention during the famine was too high to generate a severe famine without rural inequality in food availability that there was significant variance in famine mortality rates across rural regions and that rural mortality rates were positively correlated with per capita food production a surprising pattern that is unique to the famine years we provide evidence that an inflexible and progressive government procurement policy where procurement could not adjust to contemporaneous production and larger shares of expected production were procured from more productive regions was necessary for generating this pattern and that this policy was a quantitatively important contributor to overall famine mortality

union negotiations and corporate policy a study of labor concessions in the domestic steel industry during the 1980s abstract this paper studies managerial compensation financial reporting and dividend policies of the seven major domestic steel producers during requests for union concessions substantial layoffs reported losses and sacrifices by nonunion stakeholders buttressed managers case for union concessions from 1980 to 1988 sample firms reduced their work force by about 300 000 almost two thirds and annual wage payments from 16 1 to 8 6 billion reported income is lower during union negotiations controlling for cash flows as is managerial pay with average ceo salary plus bonus declining 18 dividend reductions and white collar pay cuts are substantial pervasive and clustered during union negotiations

diversification multi market contact and profitability this paper analyses the relationships between diversification multi market contact and industry profitability it focuses on the link between diversification and multi market contact to show that when diversification establishes or increases the extent to which firms meet in more than one market the effect of such multi market contact is to increase the possibility that collusion emerges as an evolutionary stable strategy as a result multi market contact may increase the potential for tacit collusion and so lead to higher profitability the effects of diversification and multi market contact on the price cost margin and the rate of return to capital are estimated using a specially constructed new database for uk manufacturing industry in 1979 this database provides information on the diversification and multi market contact of 418 firms across 134 manufacturing industries thus linking firm and industry level data the results show a clear positive effect of multi market contact on industry profitability

valuation of bankrupt firms this study compares the market value of firms that reorganize in bankruptcy with estimates of value based on management s published cash flow projections we estimate firm values using models that have been shown in other contexts to generate relatively precise estimates of value we find that these methods generally yield unbiased estimates of value but the dispersion of valuation errors is very widethe sample ratio of estimated value to market value varies from less than 20 to greater than 250 cross sectional analysis indicates that the variation in these errors is related to empirical proxies for claimholders incentives to overstate or understate the firm s value

perceptions and the politics of finance junk bonds and the regulatory seizure of first capital life in may 1991 one month after seizing executive life california regulators seized first capital life fclic both insurers were drexel clients with large junk bond holdings and both had experienced bank runs fclic s run followed regulators televised comments that its poor condition necessitated a substantial cash infusion yet fclic s statutory capital with junk bonds real estate and mortgages marked to market was far from lowest among major insurers with california policyholders it becomes lowest if junk bonds alone are marked to market at year end 1990 ignoring larger market declines in real estate mortgages and the junk bond market s 21 return in early 1991 our findings suggest a regulatory bias against junk bonds in the political backlash against the 1980s

how natural disasters affect the evolution of grain markets evidence from 18th century china abstractmarket is the foundation of modern society however how did market evolve previous research has explored the impacts of spatial distance and transportation conditions on market integratio

internal rebellions and external threats a model of government organizational forms in ancient china in ancient china a ruler needed to handle both internal rebellions and external threats to decrease the possibility of internal rebellions a ruler could organize the government to establish the balance of power among ministers while effective in preventing internal rebellions this approach could make the defense of the country against external threats less effective the tradeoff between preventing internal rebellions and dealing with external threats in a ruler s choice of government organizational form is affected by the size of the population the level of coordination efficiency and the degree of increasing returns in the military sector if the magnitude of external threats increases regardless of the type of equilibrium organizational form the equilibrium level of the concentration of power among division heads increases

when do power shifts lead to war we present and test a choice theoretic model of war decisions during shifts in power the model assumes a rising state that overtakes a declining state in capabilities in equilibrium the declining state yields at a critical point in the transition war can occur only before that critical time power shifts are more likely to lead to war as the challenger becomes more risk acceptant the declining state more risk averse the expected costs of war decrease the rising state s dissatisfaction with the status quo increases and during periods of equality between the two sides the rate of growth of the rising state s capabilities and the transition point do not affect the probability of war all these hypotheses are supported by an empirical analysis of all major power dyads since 1815 we also find that expected support from allies must be included in the calculation of a nation s capabilities the implications of the model for theories of hegemonic decline and war are discussed

central banks at war war is expensive troops must be equipped and weapons must be procured when the enormous borrowing requirements of war make the sovereigns credibility problem more difficult central banks enhance a government s ability to borrow by being the sole direct purchaser of government debt the central bank increases the effective punishment that can be imposed on the government for defaulting on the marginal lender this increases lenders confidence that the government will be punished in case of default making lenders willing to purchase the debt at a lower rate of interest the sovereign dependent on the low borrowing costs offered by the central bank has an incentive to retain the bank data covering the nineteenth and early twentieth centuries reveal that possessing a central bank lowers the sovereign s borrowing costs particularly during times of war

the collapse of first executive corporation junk bonds adverse publicity and the run on the bank phenomenon abstract in april 1991 regulators seized the major subsidiaries of first executive corporation fe an insurer that invested heavily in junk bonds during the junk bond market turmoil of 1989 1990 adverse publicity fueled a bank run at fe forcing a 4 billion portfolio liquidation before the market rose 50 60 in 1991 1992 more traditional insurers did not receive commensurate press coverage despite their substantial exposure to real estate declines which were roughly 2 5 times the junk bond decline seizure of fe s subsidiaries was defensible although fe would have become solvent within a year given average junk bond market appreciation

chain gangs and passed bucks predicting alliance patterns in multipolarity contemporary balance of power theory has become too parsimonious to yield determinate predictions about state alliance strategies in multipolarity kenneth waltz s theory predicts only that multipolarity predisposes states to either of two opposite errors which this article characterizes as chain ganging and buck passing to predict which of these two policies will prevail it is necessary to complicate waltz s theory by adding a variable from robert jervis s theory of the security dilemma the variable of whether offense or defense is perceived to have the advantage at least under the checkerboard geographical conditions in europe before world wars i and ii perceived offensive advantage bred unconditional alliances whereas perceived defensive advantage bred free riding on the balancing efforts of others

the security dilemma revisited robert jervis s article cooperation under the security dilemma is among the most important works in international relations of the past few decades in it jervis develops two essential arguments first he explains that the security dilemma is the key to understanding how in an anarchic international system states with fundamentally compatible goals still end up in competition and at war the security dilemma exists when many of the means by which a state tries 1 to increase its security decrease the security of others it provides the rational foundation for what jervis termed the spiral model which describes how the interaction between states that are seeking only security can fuel competition and strain political relations 2 second jervis explains that the magnitude and nature of the security dilemma depend on two variables the offense defense balance and offense defense differentiation 3 as a result the security dilemma can vary across space and time although states exist in a condition of international anarchy that does not vary there can be significant variation in the attractiveness of cooperative or competitive means the prospects for achieving a high level of security and the probability of war

the emergence of cooperation among egoists this article investigates the conditions under which cooperation will emerge in a world of egoists without central authority this problem plays an important role in such diverse fields as political philosophy international politics and economic and social exchange the problem is formalized as an iterated prisoner s dilemma with pairwise interaction among a population of individuals results from three approaches are reported the tournament approach the ecological approach and the evolutionary approach the evolutionary approach is the most general since all possible strategies can be taken into account a series of theorems is presented which show 1 the conditions under which no strategy can do any better than the population average if the others are using the reciprocal cooperation strategy of tit for tat 2 the necessary and sufficient conditions for a strategy to be collectively stable and 3 how cooperation can emerge from a small cluster of discriminating individuals even when everyone else is using a strategy of unconditional defection

both guns and butter or neither class interests in the political economy of rearmament astate that is confronted with a grave external threat has three basic options of response each of which involves certain trade offs first it can strengthen its military rearmament or internal balancing allows it to maintain its diplomatic freedom of action but its economy may suffer from the strain of accelerating the production of weapons of war second it can join forces with another power alliances may obviate the need for an arms buildup but they carry the risk that the state will be abandoned by its partners or drawn into undesired conflicts finally it can attempt to reconcile with its adversaries by conceding to some of their demands appeasement may be the least troublesome way to eliminate a threat but it is also the most risky because it transfers valued resources to a potential opponent after weighing these options the state should choose the policy or combination of policies that will provide an acceptable level of security at the lowest overall cost 1 the foregoing account is appealingly parsimonious but it captures only part of the story states are frequently racked by bitter internal debates over how to deal with international pressures and changes in their political leadership sometimes bring about sudden shifts in their behavior of the three strategies described above rearmament is often the most acutely divisive it requires a sharp increase in the extraction and mobilization of resources from society so it can become highly politicized some groups will inevitably bear a heavier burden than others and their discontent may eventually endanger the regime s hold on power or its ability to prepare for war to ensure domestic

anarchy hierarchy and the variety of international relations security relations between states vary along a continuum from anarchic alliances to hierarchic empires this continuum in turn is defined by the parties rights of residual control the state s choice between alternatives is explained in a theory of relational contracting as a function of the expected costs of opportunism which decline with relational hierarchy and governance costs which rise with relational hierarchy a comparison of early postwar relations between the united states and western europe and the soviet union and eastern europe illustrates the theory

domestic sources of alliances and alignments the case of egypt 1962 73 the theoretical and empirical literature on international alliances has tended to support the realist view that the pursuit or tightening of external alignments stems predominantly from external security threats consequently the role of domestic factors has generally been ignored or downplayed this article begins with the observation that leaders confronted with external threats make trade offs between the pursuit of external alignments and the mobilization of domestic resources it then argues that the choice of strategy depends on a combination of systemic and domestic factors including the perceived degree of external threat to state security the perceived degree of domestic instability and threat to the government and the constraints that derive from the domestic political economy the analysis of egypt s alignment behavior during the period from 1962 to 1973 underscores the impact of domestic and economic political constraints on the choice of domestic mobilization or alliance formation and the central role of alliances in providing resources for confronting domestic as well as foreign threats

reputation and performance among security analysts members of the institutional investor all american research team supply more accurate earnings forecasts than other analysts when forecasts are matched by the corporation followed and by the date of brokerage house issuance this contemporaneous advantage is complemented by a timing advantage all americans supply forecasts more often than other analysts stocks returns immediately following large upward forecast revisions suggest that all americans impact prices more than other analysts however there is virtually no difference in returns following large downward revisions nevertheless the collective results suggest a positive relation between reputation and performance and assuming that all americans are better paid pay and performance

markets in china and europe on the eve of the industrial revolution prevailing views suggest the industrial revolution began in europe because markets had gradually become more efficient and by the 18th century the scope of economic activity was far larger than in other parts of the world this paper compares the actual performance of markets in europe and china two regions of the world that were relatively advanced in the pre industrial period but would start to industrialize about 150 years apart the analysis covers economies that account for about two fifths of the world s population in the mid 18th century and it considers some three centuries of data our findings suggest that relative levels of market function in china and europe were similar prior to the industrial revolution higher efficiency in europe is seen only in the nineteenth century when industrialization was already underway moreover these improvements occurred in a dramatic and sudden fashion further casting doubt on an evolutionary view of market development rather than being a key condition for subsequent growth gains in efficiency appeared simultaneously with the turning point of modern growth we discuss the implications of these findings for a number of explanations for long run growth and the industrial revolution

arms versus allies trade offs in the search for security nations have two methods of increasing their security building arms and forming alliances both methods present different political costs that must be incurred to raise security building arms requires shifting economic resources to the military forming alliances requires abandoning interests that conflict with those of the ally each of these strategies produces domestic opposition a nation s response to a threat to its security must weigh the relative attractiveness of arms versus allies both in terms of their effects on internal politics and on their external benefits three cases are examined in the light of this argument the response of austria and france to the unification of germany in the 1860s is the central case theories of alliance formation based on neorealism and the offense defense balance predict that austria and france should have allied against the mutual threat of prussia this article argues that they did not form an alliance because arming separately presented lower political costs world wars i and ii likewise are analyzed from the perspective of the argument above

conflict of interest and the credibility of underwriter analyst recommendations brokerage analysts frequently comment on and sometimes recommend companies that their firms have recently taken public we show that stocks that underwriter analysts recommend perform more poorly than buy recommendations by unaffiliated brokers prior to at the time of and subsequent to the recommendation date we conclude that the recommendations by underwriter analysts show significant evidence of bias we show also that the market does not recognize the full extent of this bias the results suggest a potential conflict of interest inherent in the different functions that investment bankers perform

silver points silver flows and the measure of chinese financial integration abstract to what degree were chinese financial markets integrated with the rest of the world prior to the 1949 revolution and to what extent was the chinese foreign exchange market efficient during this period we estimate silver points for the shanghai market from 1905 to 1933 to answer these questions our inferred measures are small in value favorably match measured costs of the silver trade derived from contemporary accounts and fare well in the comparison to estimates of trans atlantic gold points this leads to the conclusion that the degree of chinese financial market integration was substantial however during and immediately after world war i our estimates of the silver points increased appreciably foreshadowing the collapse of china s linkages to world financial markets beginning in the 1930s

climate shocks state capacity and peasant uprisings in north china during 25 1911 ce china provides an interesting case study of civil conflict because of her long history and rich records using a unique dynastic panel dataset for north china during 25 1911 ce this study finds that severe famines and dynastic age were positively correlated with peasant uprisings whereas government disaster relief as a proxy for state capacity played a significant mitigating role negative climate shocks e g severe drought locust plagues affected peasant uprisings primarily through the channel of severe famines the effects of population density temperature and other climate shocks e g flood levee breaches snow disasters and frost were either not robust or insignificant

transport costs and the geography of arbitrage in eighteenth century china trade has been considered a condition for growth and development a view that might have merits in explaining the rise of the western world i use a new data set from archival sources of eighteenth century china to revisit this question this analysis suggests previous studies of market integration which attribute much growth to a reduction in transport costs have overestimated these effects ifind the overall level of market integration in china was higher than previously thought and intertemporal effects are important substitutes for trade both factors reduce the importance of trade as a unique explanation for subsequent growth jel 013 018 r1l n25

firm characteristics and analyst following abstract this paper examines the major determinants of the number of analysts following a firm a simple model of analyst following is proposed and several firm characteristics are suggested that are likely to influence the extent of a firm s analyst following by either affecting the aggregate demand for or supply of analyst services or both for the firm almost all of these characteristics are found to be strongly significant in affecting the extent of analyst following of firms and the empirical results generally accord well with economic intuition

threshold cointegration and spatial price transmission when expectations matter we examine the performance of the threshold cointegration approach specifically band tvecm to price transmission analysis in an explicit context where trade decisions are made based on expectation of final prices because trade takes time we find that following a standard inference strategy a large portion of three regime cases are not identified as such results show that transfer costs are systematically underestimated particularly in three regime models the speed of price transmission is also biased in three regime models furthermore inferences about occurrence of trade are poor with estimated models suggesting far lower market integration than is true in the data generating process