unemployment profit sharing and japan s economic success abstract in this paper we examine the economic effects of profit sharing in a duopoly model where one firm engages in sharing profits with its union while the other firm does not the results show that profit sharing i reduces wages demanded by the unions ii tends to increase employment of the profit sharing firm and to increase employment in the entire industry and iii tends to increase the joint welfare of the profit sharing firm and the profit sharing union these results seem to suggest that the japanese success may be partly attributable to their informal profit sharing scheme

outside options in a bargaining model with decay in the size of the cake abstract a simple bargaining model in which the cake decays over time at a positive rate is analysed in the limit the unique perfect equilibrium payoffs take the split the difference form these results generalise to three party bargaining

do cigarette producers price discriminate by state an empirical analysis of local cigarette pricing and taxation abstract this study analyzes the interactive effects of oligopoly pricing state taxation and anti smoking regulations on retail cigarette prices by state using panel data for the 50 us states between 1960 and 1990 the results indicate that cigarette producers do price discriminate by state though the effect is not large relative to the final retail price there are two further results 1 state taxes are more than passed on a 1 cent state tax increase results in a price increase of 1 11 cents and 2 sellers offset state and local anti smoking laws with lower prices thereby blunting effects of the regulations

is unemployment lower if unions bargain over employment would there be more employment if unions bargained over employment and not only over wages most economists seem to answer yes 1

the influence of production technology on risk and the cost of capital this paper uses a time state preference valuation model to examine how the firm s choice of technology and production method affects its equilibrium level of risk and as a result the firm s cost of capital a fixed and flexible method of production is analyzed for a firm using a cobb douglas production function in both cases it is found that risk and the cost of capital decrease with the level of capital intensity implications are drawn for the specification of empirical tests of the determinants of risk

unions and strategic managerial incentives abstract this paper shows how strategic managerial incentives weaken union power at cournot nash duopoly equilibrium although because of a prisoner s dilemma unions are not averse to those contracts thus one should question whether oligopolists automatically maximize profits when bargaining with trade unions

analyst forecasts and herding behavior the use of analyst forecasts as proxies for investors earnings expectations is commonplace in empirical research an implicit assumption behind their use is that they reflect analysts private information in an unbiased manner as demonstrated here this assumption is not necessarily valid there is shown to be a tendency for analysts to release forecasts closer to prior earnings expectations than is appropriate given their information further analysts exhibit herding behavior whereby they release forecasts similar to those previously announced by other analysts even when this is not justified by their information these results are shown to have interesting empirical implications article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the innovation potential of new infrastructure development an empirical study of heathrow airport s t5 project abstract we propose a conceptual framework to analyze technology adoption in mega infrastructure projects and assess their potential to innovating large socio technical systems drawing on an in depth empirical analysis of heathrow airport s terminal 5 project we find that innovation hinges on technology adoption decisions that are governed systematically by two intertwined determinants assessment of expected profitability and development of absorptive capacity both of which are distributed across various interdependent actors on an ad hoc basis technological decisions are also affected by other factors namely attitudes toward risk politics and lack of established standards we reveal how a schedule driven project framing creates an underlying boundary condition that constrains the longitudinal process of building a whole collective with capacity to absorb new technologies the innovation potential of mega projects is thus subjected to a fundamental unifying tension on the one hand they offer a one off opportunity to invest in cutting edge technologies and innovate socio technical systems on the other hand project stakeholders have limited time to develop capacity to absorb novel technologies and negotiate differences on assessments of profitability and risk stakeholders may therefore be compelled to agree to adopt proven technologies upfront to reduce uncertainty and mitigate risks thus limiting the innovation potential of new infrastructure development

capital costs and profitability abstract the paper estimates a line of business lb cost of capital and derives explicitly its link in long run competitive equilibrium to profitability measured as lb operating income to lb assets the ways that observed profitability differs from what would obtain in competitive equilibrium are explored

market structure uncertainty and the cost of equity capital the cost of capital plays a key role in the allocation of funds between different sectors of the economy the linkage between the cost of capital and market power has been hinted at by several authors however no rigorous development has been made this paper uses the simple static analysis of the capital asset pricing model to show that with more market power a firm s cost of equity capital declines hence firms with more market power will be able to raise equity capital at lower market rates than would the competitive firm if the product market had been perfectly competitive

bundled forecasts in empirical accounting research abstract this paper examines bundled forecasts or management earnings forecasts issued concurrently with earnings announcements which have evolved to become the most common type of management forecast we describe the econometric problems associated with measuring bundled forecast news and in particular provide evidence that the measurement error in the traditional calculation of forecast news is material and is systematically associated with variables frequently studied in forecast related research we illustrate an application of conditional expectations to overcome these problems finally we offer guidance and caveats to researchers considering the use of this method in the future

negotiation of profit sharing contracts in industry we examine the properties of profit sharing in a game theoretic oligopoly model of industry profit sharing contracts are viewed as a means of strategic commitment not as an internal incentive system in our model firms choose a contract subject to the employees participation constraint in a first stage and compete on the output market in a second stage we show that the choice of a profit sharing contract by each firm is a non cooperative equilibrium in the case of cournot competition the game under study has the structure of the prisoners dilemma the case of price competition on the output market leads to somewhat different conclusions

flexible labor compensation risk sharing and company leverage abstract in a traditional wage system the union and the firm bargain ex ante over a compensation level that does not depend on the state of the world under this regime both the wage and the interest earned by debt holders represent predetermined fixed claims on the value of the firm on the other hand in a profit sharing system the union and the firm bargain ex ante over a compensation schedule that does depend on the state of the world in this case the flexible compensation earned by workers becomes a residual claim on the value of the firm similar to the dividend earned by stock holders the implications of this correspondence between compensation structure and financial structure are explored the estimation of a model for the issuance of new long term debt supports the hypothesis of interdependence between financial and compensation decisions

management forecasts what do we know empirical research has addressed several issues related to management forecasts of earnings including the motivations management may have to release forecasts voluntarily bias in and accuracy of forecasts and reactions to management forecasts these issues are important to consider in order to interpret management forecasts properly this article summarizes this body of research and concisely describes the findings the discussion is intended to help analysts seeking to use the information in management forecasts in making their own assessments of a firm s future

unsystematic security price movements management earnings forecasts and revisions in consensus analyst earnings forecasts empirical evidence suggests that information about a firm s future earnings prospects is important to investors griffin 1976 givoly and lakonishok 1979 1980 and imhoff and lobo 1984 reported statistically significant abnormal stock returns before at and after announcements of analyst earnings forecast revisions in addition imhoff and lobo documented positive correlation between the magnitudes of the forecast revisions and the abnormal returns these findings are consistent with the hypothesis that investors find analyst forecast revisions informative another source of information about future earnings is projections from corporate officials several studies have found unsystematic stock price changes prior to and or immediately surrounding the public release of management earnings forecasts e g foster 1973 nichols and tsay 1979 patell 1976 jaggi 1978 penman 1980 and waymire 1984 the conclusion from this research is that management forecasts also convey information to investors

measurement of monopoly behavior an application to the cigarette industry a simple scheme is proposed to measure monopoly pricing behavior the coefficient of the tax rate term in a price equation identifies the ratio of price to marginal cost no direct measurement of costs is required so a major problem for other empirical studies of monopoly is avoided empirical results for cross section time series data support rejection of atomistic competition but also provide evidence against the operation of an effective cartel in the cigarette industry the model represents an alternative interpretation of related results in a recent paper by barzel application of the methodology to other markets is feasible

litigation and the value of tobacco companies this study determines how the recent wave of litigation affected returns and systematic risk in the tobacco industry we test for changes in stock prices coinciding with litigation announcements using a difference in difference event study methodology unfavorable information concerning litigation reduced tobacco returns we find a decline in systematic risk as traditionally measured by the covariance between industry returns and returns to a diversified efficient portfolio this decline may imply a substantial decline in the cost of equity capital of at least 2 2 after the period of litigation which we attribute to common cost shocks experienced by the companies participating in the master settlement agreement combined with the oligopolistic structure of the industry

how disaggregation enhances the credibility of management earnings forecasts an important problem facing managers is how to enhance the credibility or believability of their earnings forecasts in this paper we experimentally test whether a characteristic of a management earnings forecast namely whether it is disaggregated can affect its credibility we also test whether disaggregation moderates the relation between managerial incentives and forecast credibility disaggregated forecasts include an earnings forecast as well as forecasts of other key line items comprising that earnings forecast our results indicate that disaggregated forecasts are judged to be more credible than aggregated ones and that disaggregation works to counteract the effect of high incentives we also develop and test an original model that explains how disaggregation positively impacts three factors that in turn influence forecast credibility perceived precision of management s beliefs perceived clarity of the forecast and perceived financial reporting quality we show that forecast disaggregation works to remedy incentive problems only via its effect on perceived financial

the joint effect of management s prior forecast accuracy and the form of its financial forecasts on investor judgment in this paper we examine how investor reaction to management earnings forecasts is a joint function of the form of the forecast point or range forecasts and management s prior forecast accuracy high or low drawing on ajinkya and gift s 1984 expectations adjustment hypothesis king pownall and waymire 1990 argue that the value relevance of forecasts is a function of their timing credibility and form we extend the king pownall and waymire framework by hypothesizing that forecast form and one aspect of management credibility namely prior forecast accuracy will interact in their effects on investor judgment

wage pressure bargaining and price cost margins in uk manufacturing to the extent that union employer bargaining is efficient price cost margins in oligopolistic industries are predicted to depend on wage rents and on the elasticity of substitution between wages and employment in union preferences unanticipated wage inflation will also affect margins cross section and time series analysis of price cost margins in u k manufacturing industries finds that margins tend to be eroded by the level of wage rents and are invariant to the rate of wage inflation copyright 1990 by blackwell publishing ltd

on union preferences and labour market models insiders and outsiders this paper constructs a model of trade union behavior in which there is a distinction between insiders and outsiders this is used to examine one of the most troublesome issues in macroeconomic theory namely the extent to which a rise in aggregate demand might generate wage increases rather than growth in employment a generalization of the most widely used union utility function is presented the analysis reveals the conditions under which insiders will agree to let outsiders into employment derives two step wage preferences and proves a new result on wage rigidity copyright 1987 by royal economic society

estimating the divisional cost of capital an analysis of the pure play technique this paper suggests that the pure play technique can be used in conjunction with the capital asset pricing model to determine the cost of equity capital for the divisions of a multidivision firm since the beta for a division is unobservable in the marketplace a proxy beta derived from a publicly traded firm whose operations are as similar as possible to the division in question is used as the measure of the division s systematic risk to provide empirical support for using the pure play technique a sample of multidivision firms and pure play associated with each division is examined it is shown that an appropriately weighted average of the betas of the pure play firms closely approximates the beta of the multidivision firm

oligopoly profit sharing contracts and the firm s systematic risk abstract this article examines the properties of wage and profit sharing contracts in a model of oligopoly with capital market equilibrium while profit sharing contracts dominate market wage contracts profit sharing also reduces the firm s cost of equity capital under fairly broad conditions of oligopoly by enforcing lower costs in exchange for a pre determined share of cash flows to workers this form of operational leverage both reinforces the classical effect of market power on systematic risk and the impact of profit sharing on the corporate finance of the firm as previously suggested by ichino 1994 european economic review 38 1411 1422

market and industry structure and corporate cost of capital the impact of the structural attributes of industries on the cost of capital to constituent firms is examined within the framework of the capital asset pricing model capm the relationship between industry structure and systematic risk which the capm posits as the sole determinant of security returns is investigated using regression methodology the results show that industry characteristics such as capital intensity capital to labour ratio and entry barriers such as advertising have a significant influence on systematic risk and hence on the cost of capital to firms recent us studies e g sullivan 1982 have investigated the relationship between market power and the stock market return on equity using the capital asset pricing model capm within the capm framework investor required return is a linear function of systematic risk the impact of industry structure on expected return is therefore likely to be transmitted through investors perceptions of the relationship between the structural variables and firm systematic risk some recent theoretical studies have attempted to model such a relationship this paper reports an empirical examination of the predictions resulting from these and other related models for a sample of uk firms our results show that industry structural characteristics e g capital intensity have a significant influence on systematic risk and hence cost of capital of firms although the predictions of the extant theoretical models are only partly confirmed the next section identifies a number of microeconomic determinants of corporate systematic risk section iii discusses the methodology employed in the study section iv describes the sampling procedure and explanatory variables results are discussed in section v the final section provides a summary and the conclusions

beta market power and wage rate uncertainty this paper derives the formal relationship between a firm s beta and tobin s q ratio with both price and wage uncertainty present wage uncertainty is shown to affect the sign and magnitude of the relationship with q interpreted as an index of the market power while previous models suggest that systematic risk and market power are negatively related this result depends either on excluding wage uncertainty or on introducing it with unrealistic restrictions by deriving a more ambiguous relationship than other authors a plausible explanation of why empirical research has produced conflicting evidence of the sign of this relationship is provided copyright 1994 by blackwell publishing ltd

the cost of capital and the market power of firms reply and correction elements which can be specified when equation 4 was tested the variables used to measure financial leverage size operating leverage and growth were all significant at least at the 5 level in the expected direction but the market power variable then lost significance in the absence of an integrated theoretical model the relationship between market power and systematic risk can only be studied empirically the statistical results reported here suggest that powerful firms do not have any unusual ability to influence their cost of equity capital market power appears to have an impact on equity yields because of investors rational evaluation of managers operating and financial policies

systematic risk and the theory of wage indexation in this article the author integrates the theory of optimal wage indexation with capital market theory the optimal indexation factor in his model depends on workers preferences firm specific variables and economywide capital market variables a major difference between the results of the model and those of the previous literature is that in his model nonsymmetric randomness does not affect the indexation decision in addition the effects of economywide capital market variables can provide an explanation for why the author does not observe wage contracts with more than perfect indexation contracts where real wages rise with unexpected inflation copyright 1990 by the university of chicago

predicting risk some new generalizations existing adjustment techniques for forecasting systematic risk of individual firms have been based on relatively uniformative prior knowledge about the cross sectional distribution of risk estimates this study introduces prior information in the form of size and industry based cross sectional distributions of risk estimates such information is incorporated into forecasts using familiar and generalized adjustment techniques the latter being based on recently developed multiple shrinkage methods improved forecast performance results

total price uncertainty and the theory of the competitive firm in the past ten years our understanding of the behaviour of the firm under uncertainty has developed rapidly 1 this has been due to research in two broad areas the sources of uncertainty in the firm s operations and the pricing of that uncertainty by the firm s stockholders in the first area baron 1968 sandmo 1971 leland 1972 and batra and ullah 1974 have all examined the impact of price uncertainty blair 1974 holthausen 1976 and hartman 1976 the impact of factor cost uncertainty and hartman 1972 turnovsky 1973 and epstein 1978 the extent to which technological flexibility affects the impact of price and cost uncertainty these original contributions have invariably assumed that the objective of the firm is to maximize a shareholder s expected utility function this approach implicitly assumes that the price of risk is affected by the firm s decision and thus that the firm is a monopolist in the financial market that allocates risk concurrent with this literature has been the development of theories of market valuation under uncertainty arrow 1971 debreu 1959 and hirshleifer 1970 have developed the time state preference model tsp and sharpe 1964 and lintner 1965 the capital asset pricing model cap to provide a specification of the firm s market value under uncertainty hence if the equilibrium assumptions of either model hold the managers of the firm can maximize shareholder utility by maximizing an objective market value of the firm then as hite 1978 and nielsen 1975 have shown the theory of the firm under uncertainty is formally identical to the theory of the firm under certainty the only difference is that the certainty value is replaced by the certainty equivalent value determined from the equilibrium valuation equation unfortunately it is not realistic to assume that markets are either complete or perfect the most obvious incompleteness is the lack of full commodity markets some commodity markets do exist however the firm cannot remove technology or wage risk the result is that stock markets exist to allocate residual income risk whereas in a complete market all of the components of that risk would have their own commodity market thus making the stock 2 market redundant hence this paper will consider the joint interaction of total price uncertainty that is product price and factor cost uncertainty in a model where there is only a stock market to allocate residual income risk moreover we will allow the completeness of this residual income market to vary to examine its impact on the firm s operating decisions this paper can therefore be considered a synthesis and generalization of previous work in this area

the stability of uk risk measures and the problem of thin trading this paper examines the problems of estimating risk measures and their stability in thin markets it shows analytically that conventional approaches used in previous studies can lead to serious overestimates of the stability of risk measures when shares are subject to thin trading it then demonstrates using uk data that this is in fact a serious practical problem and that the resultant biases are of precisely the form predicted finally the paper presents reliable evidence on the stability of uk risk measures by using an estimation method designed to avoid thin trading bias using this approach risk measures are found to be as stable in the uk as they are in the usa this paper examines the stability of risk measures in the uk the focus is on providing reliable evidence in a market where many of the shares suffer from thin trading this is important because thin trading can seriously distort stability measures leading to incorrect conclusions indeed this is a problem which has almost certainly afflicted many previous studies of stability the paper makes four main contributions first it shows analytically that thin trading can lead to serious overstatements about stability second it uses uk data to illustrate that this is in fact a serious practical problem and that the biases are of precisely the form predicted this is important for anyone who wishes to interpret previous claims on beta stability in thin markets third the paper presents reliable evidence on the stability of uk betas by using an estimation method designed to avoid thin trading bias besides avoiding bias our

union organizing activity firm growth and the business cycle this paper analyzes the relationship between changes in unionization and firm growth average growth is significantly low er in manufacturing firms that experience successful union elections bu t these strong effects are largely illusory the authors find no evidence of a significant relationship between unionization and firm growth despite a strong cyclical pattern in election activity thei r results suggest that the significant negative effect of organizing activity on a firm s market value is not accompanied by any growth changes the authors therefore cannot reject the hypothesis that t he equity losses from union election activity represent a simple transf er of wealth from shareholders to workers copyright 1993 by american economic association

the role of supplementary statements with management earnings forecasts we investigate managers decisions to supplement their firms management earnings forecasts we classify these supplementary disclosures as qualitative soft talk disclosures or verifiable forward looking statements we find that managers provide soft talk disclosures with similar frequency for good and bad news forecasts but are more likely to supplement good news forecasts with verifiable forward looking statements we examine the market response to these forecasts and find that bad news earnings forecasts are always informative but that good news forecasts are informative only when supplemented by verifiable forward looking statements supporting our argument that these statements bolster the credibility of good news forecasts

tests of alternative wage employment bargaining models with an application to the uk aggregate labour market abstract in this paper we propose a test that discriminates among alternative models of bargaining for wages and employment the test rests on a theoretical framework which encompasses both the labour demand and the efficient bargain models of wage and employment determination it is based on testing the cross equation restrictions implied for the coefficients of union power variables in reduced form wage and employment equations the test is illustrated for the layard and nickell model of the aggregate uk labour market for which it is found that one can reject both the labour demand model and the hypothesis that wage employment bargains are efficient in favour of a generalised model of inefficient bargaining for wages and employment

union firm bargaining and the influence of product market power and production technology on systematic risk the relationship between the capm firm beta and the firm s microeconomic decisions is studied by a model under uncertainty which combines the feature of an ex ante inputs substituable production technology and the existence of a union which bargains over various economic dimensions of the firm it is shown that the earlier findings of a relationship between the firm beta the firm product market power and the labor capital ratio may be reinforced through the indirect channel of labor market bargaining but the relationship becomes more complex and heavily depends on the scope of the union firm bargaining process this yields the empirical prediction confirmed for a panel of belgian firms that any proper estimation of the determinants of firm beta must control for firms in the sample being unionized

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

the impact of the degrees of operating and financial leverage on systematic risk of common stock the capital asset pricing model postulates that the equilibrium return on any risky security is equal to the sum of the risk free rate of return and a risk premium measured by the product of the market price of risk and the security s systematic risk in the capital asset pricing model beta as an index of systematic risk is the only security specific parameter that affects the equilibrium return on a risky security

unionization and profitability evidence from the capital market this paper examines the effect of unionization on the profitability of firms abnormal monthly common stock returns for a sample of 253 nyse listed firms are estimated for the month in which the union petitions for an election and for the month in which the national labor relations board certifies the election outcome the results suggest that unionization on average is associated with a reduction in equity value when unions win an election the average loss associated with the unionization drive is 3 8 percent of equity value when unions lose an election there is an average net reduction of 1 3 percent in the equity value of the firm

learning from a piece of pie we investigate the empirical content of the nash solution to two player bargaining games the bargaining environment is described by a set of variables that may affect agents preferences over the agreement sharing the status quo outcome or both the outcomes i e whether an agreement is reached and if so the individual shares and the environment including the size of the pie are known but neither are the agents utilities nor their threat points we consider both a deterministic version of the model in which the econometrician observes the shares as deterministic functions of the variables under consideration and a stochastic one in which because of latent disturbances only the joint distribution of incomes and outcomes is recorded we show that in the most general framework any outcome can be rationalized as a nash solution however even mild exclusion restrictions generate strong implications that can be used to test the nash bargaining assumption stronger conditions further allow to recover the underlying structure of the bargaining and in particular the cardinal representation of individual preferences in the absence of uncertainty an implication of this finding is that empirical works entailing nash bargaining could and should use much more general and robust versions than they usually do copyright 2012 oxford university press

the informational role of bond analysts this study uses a large sample of sell side bond analysts reports to examine the properties of recommendations provided by bond analysts and the impact of these recommendations on bond securities first we document that the distribution of bond analysts buy hold and sell recommendations is skewed positively but less so than the distribution of equity analysts recommendations the positive skewness in bond analysts recommendations is greater for

beta firm size and concentration the asset beta of a firm is defined as the uncertainty about the firm s future value scaled by its current value empirically beta is negatively related to a firm s size and concentration in its major product market this relation has been interpreted as evidence that monopoly power affects beta this paper shows that this empirical result is also consistent with competitive product markets where greater firm size and concentration are due to greater efficiency in production thus the correlation between beta firm size and concentration is not prima facie evidence of widespread monopoly power

balancing act government roles in an energy conservation network government led interorganizational alliance networks present a sensible opportunity to overcome many societal challenges through collaborative governance in particular few researchers have studied alliance networks in the field of energy conservation in commercial buildings a sector with unique barriers to greater diffusion of innovative cost saving strategies we applied an analytic inductive case based method and social network analysis to study one particular alliance network the united states commercial building energy alliances representing interests from retail commercial real estate and healthcare sectors this alliance network was initiated by the united states department of energy with assistance from several federally funded research laboratories in the united states to promote the diffusion of knowledge and ultimately encourage greater deployment of energy efficiency and clean energy strategies in commercial buildings we draw upon interview data from 28 cases of private non profit and governmental organizations and complete network data from the alliance participants we honed in on eight focal cases of governmental organizations to provide insight on how the four forms of energy and environmental data information and knowledge shared within an alliance network address the challenge of a vastly underutilized energy resource namely conservation further we identify and discuss the public s four roles commissioner interpreter marketer and user in providing balance to the diffusion of both private and public goods in a network

the strategic choice of managerial incentives do firms with separate owners and managers maximize profits we address this question for an oligopoly where managers compete in quantities or prices as in the cournot or bertrand models and owners choose their managers incentives we find that there is a strategic aspect in the problem of selecting incentives and that profit maximizing behavior does not result in particular in the oligopoly we study the behavior of firms competing in quantity price more closely resembles perfectly competitive collusive behavior than cournot bertrand behavior

bargaining power fear of disagreement and wage settlements theory and evidence from u s industry the paper develops and estimates a theoretical model of wage determination and union nonunion wage differentials in order to overcome the institutional ctiticisms of the formal bargaining literature the paper generalizes the nash zeuthen harsanyi model by linking the solution to the institutional concepts of bargaining power and fear or cost of disagreement and by making the outcome depend not only on endogenous but also on exogenous factors an operational specification of bargaining power and fear of disagreement allows the model to be estimated with data covering twelve companies and trade unions during the period from mid 1950 s to the late 1970 s while giving limited support to the nashzeuthen harsanyi solution the empirical analysis indicates that the bargaining outcome usually deviates from the nash zeuthen harsanyi point and in accordance with the institutionalist claim that it varies significantly with exogenous factors contrary to the traditional labor economics view the results do not support the general conclusion that the bargaining solution lies on the marginal revenue product curve of labor instead the relevant coefficients suggest that for many firms and unions the outcome might be better characterized by the efficient contract vertical contract curve

union firm efficient bargaining and test of oligopolistic conduct this paper applies a production function approach to the analysis of imperfection in product and factor markets and develops a test of efficient bargaining for wage and employment determination based on a translog function defined at the firm level estimates for the belgian chemical industry are consistent with the existence of product market power which is significantly eroded by union wage rents

purposive diversification of r d in manufacturing the r d diversification in manufacturing of large us firms is found to be purposive exploiting complementarities of various research activities and forming groups of related industry categories purposively diversified firms are seen to behave differently than randomly diversified or undiversified firms further the behavioral differences between purposively diversified firms and others result because the former allocate relatively more r d funds to industry categories where appropriability conditions are good and relatively fewer funds to those categories where appropriation of the returns from r d is difficult finally r d expenditure and productivity are more closely linked at the group level than at the industry category level suggesting knowledge spills across industry categories are important

intraindustry information transfers associated with management forecasts of earnings this study documents information transfers associated with the sign and magnitude of the changes in earnings expectations conveyed by management forecasts that is the management forecast of one firm discloser generates unexpected price reactions for firms nondisclosers similar to the forecaster the results are consistent with information transfers documented for releases of actual earnings foster 1981 and sales announcements olsen and dietrich 1985 1 these results build on prior management forecast research that has documented a link between the sign and magnitude of the changes in earnings expectations conveyed by management forecasts and the unexpected share returns price reactions of forecasting firms ajinkya and

the impact of conservatism on management earnings forecasts abstract we investigate the empirical relation between a firm s accounting conservatism and management s issuance of quantitative earnings forecasts using three measures of conservatism from prior literature along with two aggregate measures we find a negative association between conservatism and the frequency specificity and timeliness of management forecasts the results are robust to estimating the regression in changes using firm fixed effects and using a two stage instrumental variables approach overall these results suggest that accounting conservatism acts as a substitute for management forecasts by decreasing information asymmetry in the market and reducing potential litigation through the timely reporting of bad news

why capital hires labor a bargaining perspective organizational forms often serve as vehicles for the appropriation of quasi rent capitalist firms typically emerge when production requires noncontractible investments in specific physical assets because worker control would divert quasi rents away from ass et owners ex post conversely labor managed firms tend to emerge in niches requiring specialized human capital but general purpose physi cal assets a key result is that capitalist firms can persist in competitive markets even when labor managed firms would yield a larg er total surplus copyright 1993 by american economic association

the simple macroeconomics of profit sharing this paper is in the spirit of the temporary equilibrium approach to macroeconomics it basically extends that framework to cover a profit sharing system and then compares the macroeconomic characteristics with those of the more familiar wage system a first preliminary step is to demonstrate how a microeconomic model of monopolistic competition can be built up into a junior member of the keynesian macro family the methodology is to create from first principles including a careful formulation of a monopolistically competitive product market structurea natural underpinning for the standard aggregate demand specification the primary goal of the paper is to apply the integrated monopolistic competitionkeynesian type apparatus described above to investigate the macroeconomic properties of a profit sharing economy the existence of a consistent general framework covering both cases invites meaningful comparisons that indicate clearly why an economy based on profit sharing principles possesses natural immunity to stagflation by contrast the wage economya system we have largely accepted without critically examining its macroeconomic consequences is more prone to suffer from unemployment and inflation the policy implications for aggregate demand management in wage and share systems are analyzed and contrasted in writing this paper my philosophy has been to not shirk from using those reasonable parameterizations and functional forms which yield nice crisp results and permit me to focus sharply on the essential logic of basic issues it is certainly possible to present the main results in a somewhat more general formulation as the astute reader will appreciate but i fear only at some cost of distracting attention from those central features i wish to highlight

spinning off and spinning on the federal government role in the development of the us computer software industry abstract the development of the us computer software industry has been powerfully influenced by federal government policy during the postwar period its importance for the demands of cold war defense especially strategic air defense during the 1950s meant that the software industry received considerable support from federal rd but by the late 1960s these industrial innovations drew on research and manpower that had been generously supported by federal government funds our discussion of the federal role in the us software industry begins with a description of the earliest years of federal involvement in the u s computer industry a period during which software scarcely existed as a distinguishable technology and focus of development effort we then examine the federal role in supporting the emergence of computer science as an academic discipline a discussion that spans 1955 1990 the concluding section summarizes our argument and suggests some points of contrast with the experience of other industrial economies

corporate monopoly power and risk abstract the relationship between monopoly power and concentration may be influenced by the riskiness of the firm two related issues are considered in this paper the impact of market structure and conduct on the risk of the firm and the impact of risk upon the relationship between profitability and concentration an a priori relationship between risk market structure and profitability is derived within the mean variance framework of the capital asset pricing model

prediction performance of earnings forecasts the case of u s multinationals prior accounting research has provided evidence of the information content of a company s actual or predicted accounting earnings prior studies have also found that factors such as firm size industry or systematic risk influence the accuracy of the earnings predictions this study investigates the accuracy and the consensus among forecasters of earnings estimates for u s domestic and u s multinational corporations companies were classified into a domestic or multinational type for this research following the criteria established by statement of financial accounting standards no 14 for required disclosure of foreign operations the empirical results indicate that the accuracy of earnings forecasts is significantly lower for purely domestic firms than for u s based multinationals likewise the level of consensus in earnings estimates submitted by financial analysts is significantly lower for u s domestic than for u s multinational firms

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

bargaining power and wage employment contracts in a unionized industry input and output data are used in conjunction with negotiated wages and employment to estimate a fully specified bargaining model between a labour union the international woodworkers of america and representatives from the british columbia wood products industry bargaining powers are modelled as functions of exogenous variables believed to have influenced the parties relative strike costs the estimated bargaining powers are plotted over time and compared to the proportion of rents captured by each party parameters of the union utility function and the firms technology are also estimated and hypothesis tests are conducted on various aspects of the model there are still relatively few studies in which fully specified models of bargaining between labour unions and firms are estimated this reflects both the extensive data requirements and the complexity of the models involved a fully specified model includes a representation of the firms objectives and technological constraints the union s goals and constraints and the bargaining structure furthermore even when micro data are available usually more than two parties are involved i e firms will negotiate with several unions and each union will have to deal separately with the many firms operating within the industry this complicates the modelling of the bargaining setting considerably in this study data on the wood products industry in british columbia canada are analyzed during the period under study 1963 1983 negotiations in this industry were highly centralized in fact the bargaining setting can be described as a bilateral monopoly between the international woodworkers of america iwa a powerful and stable union and the forest industrial relations an employer association representing firms in the industry this data set includes information on outputs and nonlabour inputs thus allowing the calculation of profits and the joint determination of output and other inputs along with employment and wages a structural model with four dependent variables wages employment output and a materials and supplies input is estimated firms are assumed to maximize profits and union objectives are modelled by a ces utility function with employment and the difference between union wages and alternative wages as arguments given a representation for the firms technology and the union preferences a

the effect of wage bargains on the stock market value of the firm the author estimates the change in the value of common stock resulting from an unexpected change in collectively bargained labor costs using bargaining unit wage data and nyse stock returns he estimates a dollar for dollar trade off between these variables this result is consistent with stock valuations based on present value maximizing managerial decisions that is the results are consistent with hotelling s lemma the author also finds support for the hypothesis that collective bargains maximize the sum of shareholder and union member wealth that is the results are consistent with strong efficiency in the contracting environment copyright 1989 by american economic association

additional evidence on the information content of management earnings forecasts prior studies have documented that management earnings forecasts which exceed expected earnings good news forecasts are associated with significant positive abnormal stock returns on average when publicly released however no significant negative abnormal returns are observed immediately surrounding the release of management forecasts which are defined as bad news these findings conflict with the results to date on price reactions associated with earnings announcements for example ball and brown 1968 found that good news bad news annual earnings announcements are associated with positive negative abnormal returns in the months preceding and including the annual earnings announcement foster 1977 reported similar findings for quarterly earnings announcements beaver clarke and wright 1979 found a positive ordinal association between the magnitude of unexpected earnings the difference between actual earnings and expected earnings

heterogeneous firms and the organization of production firms in the same industry exhibit systematic differences in the organization of production and the structure of employment entrepreneurial ability is the specific scarce input that limits the size of a firm this input must be allocated to two activities coordinating production and monitoring workers able entrepreneurs can convert calendar time into larger supplies of coordinating effort that enable them to assemble large firms greater ability implies a higher shadow price of time which increases the implicit costs of monitoring a dispersion of entrepreneurial abilities generates an equilibrium size distribution of firms differences in monitoring costs affect the choice of worker productivities the design of products and the organization of production the monitoring cost hypothesis advanced in this paper goes a long way in explaining the equilibrium of an industry containing heterogeneous firms that differ in size and behavior