occupational choice and the process of development this paper models economic development as a process of institutional transformation by focusing on the interplay between agents occupational decisions and the distribution of wealth because of capital market imperfections poor agents choose working for a wage over self employment and wealthy agents become entrepreneurs who monitor workers only with sufficient inequality however will there be employment contracts otherwise there is either subsistence or self employment thus in static equilibrium the occupational structure depends on distribution since the latter is itself endogenous we demonstrate the robustness of this result by extending the model dynamically and studying examples in which initial wealth distributions have long run effects in one case the economy develops either widespread cottage industry self employment or factory production employment contracts depending on the initial distribution in the other example it develops into prosperity or stagnation

the international debt crisis and bank loan loss reserve decisions the signaling content of partially anticipated events the huge increases in loan loss provisions by major bank holding companies bhcs in 1987 were a signal of impending asset writedowns of loans to less developed countries ldcs 1 since loan loss reserve decisions like asset write downs are simply bookkeeping adjustments significant market reactions to such announcements should not be expected strong and meyer 1987 however found a positive and statistically significant cumulative average residual after the announcement of asset write downs 2 thakor 1987 argues that write downs have a price effect not because they mean much by themselves but because they signal events to come specifically he sees write downs as a signal of economic value enhancing corporate restructuring to come in the future p 662 we use event study methods to examine security returns for the twenty five largest u s bank holding companies surrounding citicorp s 3 billion loan loss

antitakeover charter amendments and stockholder wealth abstract many large corporations have recently adopted antitakeover charter amendments which make the transfer of corporate control more difficult this paper develops and tests competing theoretical explanations for the passage of these amendments in one view antitakeover provisions are adopted because incumbent management seeks job protection at stockholders expense the alternative hypothesis is that antitakeover provisions benefit stockholders perhaps by extracting greater payment in exchange for corporate control although inconclusive the evidence provides weak preliminary support for the hypothesis that antitakeover amendments are best explained as a device for managerial entrenchment

an analysis of stock price reaction to management change in distressed firms abstract this study analyzes excess returns to shareholders at announcement of a change in senior management of distressed firms excess returns are significantly positive which is consistent with the internal corporate control hypothesis that management change following poor performance is associated with gains to shareholders cross sectional tests of the effects reveal a significant title effect and significant interactions between title and appointment of an outside successor and title and firm size these findings present new insights into the circumstances in which external vs internal markets for managers will affect shareholder wealth

the risk and required return of common stock following major price innovations this paper presents empirical evidence demonstrating that the risk and expected returns of common stocks typically change in the aftermath of large price movements when temporary changes in uncertainty follow major financial events subsequent stock returns should be positively correlated with the shift in return volatility this prediction is strongly supported by the data on more than 9 100 daily price change events during 1962 1985 moreover the data also suggest that ex ante returns on common stocks may incorporate a premium for increases in parameter uncertainty associated with the events

victims and shareholders the dilemmas of presenting corporate policy during a crisis corporate crises such as accidents scandals and product safety incidents exacerbate stakeholder demands in such a way that conflict can arise between the interests of shareholders and crisis vict

generalised soft binomial american real option pricing model fuzzy stochastic approach abstract the stochastic discrete binomial models and continuous models are usually applied in option valuation valuation of the real american options is solved usually by the numerical procedures therefore binomial model is suitable approach for appraising the options of american type however there is not in several situations especially in real option methodology application at to disposal input data of required quality two aspects of input data uncertainty should be distinguished risk stochastic and vagueness fuzzy traditionally input data are in a form of real crisp numbers or crisp stochastic distribution function therefore hybrid models combination of risk and vagueness could be useful approach in option valuation generalised hybrid fuzzy stochastic binomial american real option model under fuzzy numbers t numbers and decomposition principle is proposed and described input data up index down index growth rate initial underlying asset price exercise price and risk free rate are in a form of fuzzy numbers and result possibility expected option value is also determined vaguely as a fuzzy set illustrative example of equity valuation as an american real call option is presented

can micro credit bring development abstract we examine the long run effects of micro credit on development in an occupational choice model similar to banerjee and newman jpe 1993 micro credit is modeled as a pure improvement in the credit market that opens up self employment options to some agents who otherwise could only work for wages or subsist micro credit can either raise or lower long run gdp since it can lower use of both subsistence and full scale industrial technologies it typically lowers long run inequality and poverty by making subsistence payoffs less widespread thus an equity efficiency tradeoff may be involved in the promotion of micro credit however in a worst case scenario micro credit has purely negative long run effects the key to micro credit s long run effects is found to be the graduation rate defined as the rate at which the self employed build up enough wealth to start full scale firms we distinguish between two avenues for graduation winner graduation of those who earn above average returns in self employment and saver graduation due to gradual accumulation of average returns in self employment long run development is not attainable via micro credit if winner graduation is the sole avenue for graduation in contrast if the saving rate and self employment returns of the average micro borrower are jointly high enough then micro credit can bring an economy from stagnation to full development through saver graduation thus the lasting effects of micro credit may partially depend on simultaneous facilitation of micro saving eventual graduation of the average borrower rather than indefinite retention should be the goal of micro banks if micro credit is to be a stepping stone to broad based development rather than at best an anti poverty tool

state intervention in the market for corporate control abstract this study investigates the impact of pennsylvania senate bill 1310 on the share prices of pennsylvania corporations considered the most severe of the second generation antitakeover laws the statute limits the ability of shareholders to challenge management through the proxy process and eliminates the traditional fiduciary obligation of directors to promote shareholders interests we find that pa sb1310 significantly decreased share values and estimate the loss to shareholders of pennsylvania firms at 4 billion however firms with antitakeover charter amendments already in place were less affected and firms that exempted themselves from pa sb1310 recovered a portion of shareholders wealth

reaction of british bank share prices to citicorp s announced 3 billion increase in loan loss reserves abstract this study assesses the impact of citicorp s announcement of a 3 billion increase in loan loss reserves on may 19 1987 on the share prices of british banks the announcement may have had an impact on british banks because like citicorp the major british ones have a high degree of exposure to the debt of less developed countries ldcs musumeci and sinkey detected a favorable reaction of u s money center banks to the announcement because of disparate bank characteristics and regulations between the u s and the united kingdom share prices of british banks may be affected in a different manner than u s banks the results of our study indicate that british bank share prices were adversely affected by the announcement our findings confirm that 1 the strategy of a bank in one country may not only influence other banks in that country but foreign banks as well and 2 the effects on banks can be dependent on the country of origin

an analysis of the impact of deposit rate ceilings on the market values of thrift institutions this paper examines the impact of changes in deposit interest rate regulations on the common stock values of savings and loan institutions the analysis indicates that stockholder owned savings and loans s l s have experienced statistically significant declines in equity market values at the announcement of the removal of ceilings on certain consumer small saver certificate accounts and the introduction of short term variable rate money market certificates we find the evidence to be consistent with the hypothesis that s l s have earned economic rents from restrictions on interest rates paid to small saver accounts and that relaxation of interest rate ceilings has reduced these rents a central issue in the economics of regulation is whether regulators behave in a way that primarily benefits the economic agents whose actions they are supposed to regulate the proposition that regulation is demanded and acquired by the regulated and that regulations are designed and administered primarily for their benefit was originally put forth by stigler 19 and has come to be known as the capture theory of regulation an alternative view is that regulators adopt policies which serve some other perhaps public or possibly the regulators own interest and that administration of these policies does not benefit the regulated entities this paper examines the regulation of savings and loan associations deposit interest rates and reports evidence pertaining to the impact of the administration of regulation regulation of interest rates paid to depositors in federally insured savings and loan associations began in 1966 since that time several changes in the maximum allowed interest rates deposit rate ceilings have been made these changes present an opportunity to observe the impact of one form of regulatory action on savings and loan institutions deposit rate regulation has been the subject of extensive previous research the empirical investigations have focused primarily on two issues 1 the allocational efficiency and wealth redistribution effects of rate ceilings and 2 the impact of deposit rate ceilings on the flow of funds into the residential

risk aversion uncertain information and market efficiency abstract this paper develops and tests the uncertain information hypothesis as a means of explaining the response of rational risk averse investors to the arrival of unanticipated information the theory predicts that following news of a dramatic financial event both the risk and expected return of the affected companies increase systematically and that prices react more strongly to bad news than good an empirical investigation of over 9000 marketwide and firm specific events produces results consistent with these predictions we conclude that the market reacts to uncertain information in an efficient if not instantaneous manner

new evidence on stock price effects associated with changes in the s p 500 index since october 1989 standard and poor s has when possible announced changes in the composition of the s p 500 index one week in advance because index funds hold s p 500 stocks to minimize tracking error index composition changes since this date provide an opportunity to examine the market reaction to an anticipated change in the demand for a stock using post october 1989 data the authors document significantly positive negative postannouncement abnormal returns that are only partially reversed following additions deletions these results indicate the existence of temporary price pressing and downward sloping long run demand curves for stocks and represent a violation of market efficiency copyright 1997 by university of chicago press

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

the international debt crisis and bank security returns in 1982 this research investigates the reaction of bank security returns to the 20 august 1982 mexican request for the rescheduling of its external debt empirical results show that the reaction of bank stocks was rapid and significantly negative within six days of the published announcem ent prices had adjusted to reflect levels of individual bank exposure which re futes the much longer time impliedin other studies of this event the authors c onclude that the marketreaction was essentially efficient rational and orderly copyright 1987 by ohio state university press

tariff jumping fdi and domestic firms profits studies of the welfare implications of trade policy often do not take account of the potential for tariff jumping fdi to mitigate positive gains to domestic producers we use event study methodology to examine the market effects for u s domestic firms that petitioned for antidumping ad relief as well as the effect of announcements of fdi by their foreign rivals in the u s market on these u s petitioning firms on average affirmative u s ad decisions are associated with 3 abnormal gains to a petitioning firm when there is no tariff jumping fdi but no abnormal gains if there is tariff jumping fdi the evidence for this mitigating effect is strongest when announcements of the intended tariff jumping fdi have already occurred before an ad decision takes place which happened in fair number of cases we also find evidence that the announcements of plant expansions and to some extent new plants have significantly larger negative effects on u s domestic firms profits than other types of fdi including acquisitions and joint ventures

the relationship between the brazilian interest payments moratorium and bank equity returns evidence from the london stock exchange 1 this study examines the effects of the brazilian interest payments moratorium announcement on the equity return levels of several large us and european commericial banks traded on the london stock exchange the empirical evidence suggests that in general the equity prives of the sample banks immediately reflected the relevant information associated with the announcement however some degree of pricing inefficiency was determined to exist as the market was unable to discriminate among banks of the basis of exposure to brazilian loans

large shareholders and the monitoring of managers the case of antitakeover charter amendments this paper examines the role of large shareholders in monitoring managers when they propose antitakeover charter amendments we attempt to distinguish between two competing hypotheses the active monitoring hypothesis and the passive voting hypothesis we find a statistically significant positive relation between institutional ownership and the stockholder wealth effects of various types of amendments after controlling for ownership concentration among institutions managerial ownership and firm size our empirical evidence lends support to the active monitoring hypothesis proposed by demsetz 1983 and shleifer and vishny 1986 that the existence of large shareholders leads to better monitoring of managers

are acquisitions by utility firms beneficial utility firms are subject to peculiar regulatory characteristics that may allow for unique wealth effects resulting from acquisitions the wealth effects derived from acquisitions of utility firms is measured and the analysis reveals negative wealth effects for acquirers and positive wealth effects for targets however the wealth effects are generally less favorable for utility firm acquirers than other acquirer firms because of the regulatory barriers that prevent them from pursuing attractive targets

the gains to bidding firms from merger abstract this study examines the effect of mergers on the wealth of bidding firms shareholders bidding firms gain significantly during the twenty one days leading to the announcement of each of their first four merger bids these results fail to support the capitalization hypothesis that bidders gains are captured at the beginning of merger programs bidders abnormal returns are positively related to the relative size of the merger partners and the gains during the announcement period are larger for mergers which are successful though the gains are larger prior to 1969 merger bids after 1969 also significantly increase the wealth of bidding firms shareholders the results suggest that the inconclusive findings of the earlier studies may be due to methodological deficiencies the findings of this study are consistent with value maximizing behavior by the management of bidding firms

takeover defenses ownership structure and stock returns in the netherlands an empirical analysis this study empirically examines the relationships between a firm s takeover defenses and its ownership structure and stock returns analyzing data of dutch listed companies we find that multiple antitakeover defenses are increasingly adopted when firms are characterized by relatively lower ownership concentration the evidence supports the hypothesis that more concentrated ownership of shares provides more effective monitoring of managers as defense by issuing preferred share has recently been the most widely adopted mechanism in the netherlands its impact on shareholders wealth is also analyzed we observe the presence of two opposing effects of this antitakeover measure

the effect of discretionary price control decisions on equity values abstract the macro literature presents conflicting evidence on the effects of price controls in this study the fact that the macro economic effect of wage and price controls is the aggregation of the micro economic effects is used to implement a different approach to measure the effects of price controls the effect of price controls is inferred from examining the impact of discretionary regulatory decisions on the equity values of individual firms during phase ii of nixon s economic stabilization program the empirical results indicate that violators of the regulations incurred significant abnormal losses that were unrelated to the explicit penalties this suggests that implicit penalties were imposed on offending firms the analysis of price increase decisions provides weak evidence that these price commission decisions had an impact on equity values

an empirical analysis of strategic competition and firm values the case of r d competition abstract we operationalize a firm s competitive strategy through a new empirical measure and develop a framework for empirical analysis of the market value of strategic behavior using this framework we study announcement effects of r d spending the announcing firm s stock prices are positively influenced by a change in spending and negatively by our competitive strategy measure csm competitors stock prices are positively influenced by the interaction between the market s reaction to the announcing firm and the csm our results are consistent with positive effects of accommodating competition with strategic substitutes and nonpositive effects of tough competition with strategic complements

do demand curves for stocks slope down since september 1976 stocks newly included into the standard and poor s 500 index have earned a significant positive abnormal return at the announcement of the inclusion this return does not disappear for at least ten days after the inclusion the returns are positively related to measures of buying by index funds consistent with the hypothesis that demand curves for stocks slope down the returns are not related to s p s bond ratings which is inconsistent with a plausible version of the hypothesis that inclusion is a certification of the quality of the stock

application of the fuzzy stochastic methodology to appraising the firm value as a european call option abstract the valuing of a firm equity as a call option is a crucial problem in financial decision making there are two basic aspects that are studied contingent claim features payoff functions and risk stochastic process of underlying assets however non preciseness vagueness uncertainty of input data is often neglected thus a combination of risk stochastic and uncertainty fuzzy instruments could be a useful approach in calculating a firm value as a call option the black scholes methodology of appraising equity as a european call option is applied fuzzy stochastic methodology under fuzzy numbers t numbers is proposed and described fuzzy stochastic model of appraising a firm equity is proposed input data are in a form of fuzzy numbers and result firm possibility expected equity value is also determined vaguely as a fuzzy set illustrative example is introduced

the impact of an unexpected political resignation on exchange rates based on the theory of economic regulation political shocks are examined as unexpected events in the light of the efficient markets hypothesis and a political resignation is taken as an example of such an event the hon j dawkins mp resigned as the federal treasurer of the australian government on friday 17 december 1993 there have been a number of studies on the effect of economic and political events on stock prices this study considers the impact of dawkin s resignation on the foreign exchange rates of the major traded currencies in australia the traditional event study methodology based on the market model and the lesser used multivariate methodology of seemingly unrelated regressions are used for the analysis the sample of currencies is considered both as a portfolio and on an individual basis with efficiency of the currency markets being tested for anticipatory event related and persistence effects the paper concludes by contrasting the findings of the two methodologies the study repo

the incidence of regulatory rents in the motor carrier industry this article focuses on two questions in the debate over motor carrier regulation first did regulation create eliminate or have no effect on monopoly rents in the trucking industry second ifthere were rents what was their incidence were they received by owners oftrucking firms dissipated through higher costs or captured by the teamsters union data on share price responses to deregulation announcements reveal declines in expected profits of 8 19 of totalfirm value this suggests that regulation created monopoly profits and indicates that at least some of these rents accrued to owners of trucking firms firms responses to regulatory change are modelled as functions of company s operating characteristics and measures of unionization operating efficiency and service characteristics are shown to affect the impact of deregulation on share values

the effect of pre emptive right amendments on shareholder wealth abstract pre emptive rights allow existing shareholders to purchase a new offering of shares before the general public this paper investigates the effect on shareholder wealth of removing pre emptive rights from corporate charters two hypotheses are constrasted 1 shareholder wealth maximization suggests that management uses this extra degree of freedom to pick the least cost method for raising new equity hence the amendment increases shareholder wealth 2 management welfare maximization holds that management will use the passage of the amendment to maximize their own welfare sometimes to the detriment of shareholders hence the amendment decreases shareholder wealth the evidence indicates that the amendment decreases shareholder wealth

the value of administered protection a capital market approach the focus of this paper i s on the escape clause petitions filed under the trade act of 1974 section 201 first the capital marketevent study method is used to analyze the effects of protection decisions then cross section regressions are performed to examine the influence of key variables on the observed market reaction the authors conc lude that while protection is beneficial to beleaguered industries the extent o f such benefits is quite narrowly circumscribed and is conditional on internal v ariables for each firm protection is thus not the panacea that its advocates cl aim copyright 1986 by mit press

microcredit and development in an occupational choice model abstract the existing literature on macroeconomic implications of microcredit is too generic and does not reflect some important characteristics of microenterprises this paper proposes a potentially useful approach of modeling microcredit interventions in an occupational choice model

an empirical investigation of the impact of antitakeover amendments on common stock prices abstract antitakeover amendments are amendments to a corporation s charter that impede the ability of an outsider to gain control of the firm a number of individuals and institutions have onjected to such amendments on the grounds that they are not in the best interests of the shareholders of the firms that adopt them this paper employs event time methodology to investigate the impact of antitakeover amendments on the common stock prices of firms that adopt them the results indicate that the announcement of such amendments is associated with a positive revaluation of stock price contrary to the concerns of their critics we conclude that antitakeover amendments are proposed by managers who seek to increase the value of the firm and are approved by stockholders who share that objective