new evidence of the impact of dividend taxation and on the identity of the marginal investor this paper examines the impact of a major change in dividend taxation introduced in the united kingdom in july 1997 the reform was structured in such a way that the immediate impact fell almost entirely on the largest investor class in the united kingdom namely pension funds we find significant changes in the valuation of dividend income after the reform in particular for high yielding companies these results provide strong support for the hypothesis that taxation affects the valua tion of companies and that pension funds were the effective marginal investors for high yielding companies

ex day behavior tax or short term trading effects this study examines the behavior of share prices around the ex dividend dates before and after the introduction of the 1988 income and corporation taxes act that reduced substantially the tax differential between dividends and capital gains in the united kingdom we find that in the pre 1988 period when the differential taxation of dividends and capital gains is high ex day returns are positive and significant in contrast in the post 1988 period ex day returns are in most cases negative and insignificant further analysis reveals that while ex day returns are significantly related to dividend yield and to the length of the settlement period they are not affected by the commonly used measures of transaction costs such as the bid ask spread and trading volume or by the day of week month of the year type of dividend distribution or number of days to the actual receipt of the cash dividend we conclude that taxation affects significantly ex day share prices in the previous studies have documented that the risk adjusted abnormal returns on the ex dividend dates are positive and significantly related to the dividend yield the interpretation of these findings is however controversial the question relates to what category of investors sets ex day prices elton and

the ex dividend day behavior of canadian stock prices tax changes and clientele effects with some simple assumptions the ex dividend day price drop and the associated dividend can be used to measure the market s marginal tax rate previous research has estimated the implied tax rate for the u s this paper extends the analysis to canada where the tax treatment of dividends and capital gains is completely different from that in the u s the paper also presents estimates from 1970 80 to include four distinct periods when the tax treatment was different hence we include an implied test of market efficiency as well as those for the relevance of taxes and the existence of tax based dividend clienteles

dividend stripping risk exposure and the effect of the 1984 tax reform act on the ex dividend day behavior this article investigates the importance of risk exposure and the effects of the 1984 tax reform act on the ex dividend day behavior the tax reform appears to have inhibited short term trading activities by increasing the risk exposure of incorporated traders moreover stocks for which existing listed options permitted the reduction of risk through hedged dividend stripping strategies were affected much less from the new tax code than their nonoptionable counterparts this implies that risk affects investors dividend yield choice and that the ex dividend day behavior may be caused in part by the existence of risk premia copyright 1989 by the university of chicago

the energy efficiency paradox revisited through a partial observability approach the present paper examines the energy efficiency paradox demonstrated in greek manufacturing firms through a partial observability approach the data set used has resulted from a survey carried out among 161 energy saving technology firm adopters maximum likelihood estimates that arise from an incidental truncation model reveal that the adoption of the energy saving technologies is indeed strongly correlated to the returns of assets that are required in order to undertake the corresponding investments the source of the energy efficiency paradox lies within a wide range of factors policy schemes that aim to increase the adoption rate of energy saving technologies within the field of manufacturing are significantly affected by differences in the size of firms finally mixed policies seem to be more effective than policies that are only capital subsidy or regulation oriented

the ex dividend day behavior of option prices a security purchased at the opening of trade on the ex dividend day does not include a claim to the dividend announced earlier yet if purchased on the previous day the last cum dividend day it does thus the price of a security that goes exdividend is expected to drop in this time interval the expected price drop around the ex dividend day has been compared to the dividend per share in various past studies campbell and beranek 1955 durand and may 1960 elton and gruber 1970 kalay 1982 the documented behavior of stock prices around the ex dividend day seems to be consistent with market efficiency that is it provides no profit opportunities an interesting question that arises is whether the discontinuity in the stock price carries over to call options on the stock with similar implications for market efficiency because call options are unprotected against payment of dividends their pricing has to take into account the change in the value of the underlying asset around the ex dividend day this point has been recognized in the literature since it is well known that the price of a share of common stock is expected to drop around the ex dividend day since call options written on such underlying shares are not protected against dividend payment a question arises as to the behavior of the prices of call options around the exdividend day assuming a rational exercise policy on the part of investors it can be demonstrated that the price behavior of american call options around the ex dividend day should not be different from that on any other arbitrarily chosen day however our empirical analysis using both parametric and nonparametric methods indicates that perhaps because of a wrong exercise policy on the part of investors abnormal returns are observed in certain cases this finding casts some doubt on the presumption of efficiency of the american call option market around the exdividend day we wish to thank john long stanley kon clifford smith jeremy bulow and harry friedman for helpful comments on earlier drafts of this paper we are also indebted to david cho and elli kraizberg for their assistance finally the financial support of the salomon brothers center for the study of financial institutions new york university is gratefully acknowledge

does corporate strategy matter a revisionist view that corporate strategy does not matter has gained considerable influence in recent years this view largely stems from empirical results of early variance decomposition studies that found negligible corporate effects associated with profitability differences between businesses our analysis of the variance decomposition literature shows this view to be incorrect not only do the studies as a group show that factors at the corporate level of organizations contribute to profitability differences but also evidence suggests that factors specifically associated with corporate strategy contribute to corporate effects corporate strategy in fact does matter copyright 2001 john wiley sons ltd

taxes and dividends the uk evidence abstract this paper provides empirical evidence on the simultaneous effects of both corporation and personal income taxes on dividend payment adjustments and on the behaviour of share prices on the ex dividend dates the results show that companies set their dividend policies to minimise their tax liability and to maximise the after tax return of their shareholders in particular firms that are unable to deduct the advanced corporation tax from their tax liability are found to pay low dividends in addition consistent with the tax hypothesis we find that the differential taxation of dividends and capital gains results in a decrease in ex day share prices by significantly less than the amount of the dividend there is no evidence of a tax induced dividend clientele

canada s dual class shares further evidence on the market value of cash dividends the canada income tax act of 1971 permitted canadian corporations to create two classes of equity one paying ordinary cash income and the other paying capital gains income cash paying shares have often sold at a premium empirical results indicate that the premium is largely explained by the relative value of the dividends paid and by costs imposed on investors by stock dividend payment and share conversion procedures premiums for a few firms also reflect the relative liquidity of the two classes of shares no evidence exists that investors prefer cash income to equal amounts of capital gains within the last fifteen years over twenty corporations listed on canadian stock exchanges have issued two classes of equity one paying cash dividend income and the other paying capital gains each share is convertible one for one into shares of the other class has equal claim to the issuing firm s profits and receives distributions on the same date as the other class thus each is equally subject to the uncertainty of the firm s operating cash flows these unusual securities are uniquely suited to a study of an important unresolved issue in finance the effect of dividend policy on firm value long 6 and shefrin and statman 11 indicate that claims to cash income may sell for a premium in contrast elton and gruber 3 poterba 9 and other authors present evidence that suggests that capital gains are preferred if markets were frictionless and information were without cost the price history as opposed to the conversion history of canada s dual class shares would be of no use to the study of this issue the actions of traders using the conversion option would ensure that the class a and class b shares of a particular company sell for the same price however positive transactions costs permit differences between prices of the two classes the relative expected value of distributions the relative market value of equal amounts of the two types of distributions and relative

alfred chandler and capabilities theories of strategy and management alfred d chandler s scholarship on the large industrial enterprise has deepened understanding of economic development and helped establish the field of strategic management research chandler s monumental work emphasized the importance of organizational innovation managerial acumen and business performance a particular contribution was the support provided for a capabilities theory of the business enterprise this article also looks at recent developments in industrial organization that are less well explained and appreciated in the chandler framework copyright 2010 the author 2010 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

carbon dioxide emissions allocation a review carbon dioxide co2 emissions allocation plays a fundamental role in determining reduction responsibility at economy level or emission permits at firm level past decades have seen the development and applications of various methods for co2 emissions allocation this paper provides a literature review of co2 emissions allocation with emphasis on the evolution of allocation methods used it begins with a summary of the most popular allocation principles and criteria that lay a foundation for the development of allocation methods we then classify the existing allocation methods into four groups namely indicator optimization game theoretic and hybrid approaches the main features and findings of past studies are identified and summarized while the fairness principle prevails in earlier studies the efficiency principle has been found to receive increasing attention recently we also present a comparison of the empirical results based on ten popular indicator methods to show how indicator choice affects the allocation results issues related to selecting appropriate methods in co2 emissions allocation are finally discussed further research may be carried out to strike a balance between fairness and efficiency so that the allocation results become more widely acceptable and economically feasible

time variation of ex dividend day stock returns and corporate dividend capture a reexamination this paper documents some empirical facts about ex day abnormal returns to high dividend yield stocks that are potentially subject to corporate dividend capture we find that average abnormal ex dividend day returns are uniformly negative in each year after the introduction of negotiated commission rates and that time variation in ex day returns during the negotiated commission rates era is consistent with corporate tax based dividend capture ex day returns are more negative when the tax advantage to corporate dividend capture is greatest and more positive when increases in transaction costs and risk reduce incentives to engage in corporate tax based dividend capture copyright the american finance association 2000

ex dividend day stock price behavior the case of the 1986 tax reform act this paper analyzes the behavior of stock prices around ex dividend days after the implementation of the 1986 tax reform act that dramatically reduced the difference between the tax treatment of realized long term capital gains and dividend income in 1987 and completely eliminated the differential in 1988 we show that this tax change had no effect on the ex dividend stock price behavior which is consistent with the hypothesis that long term individual investors have no significant effect on ex day stock prices during this time period the results indicate that the activity of short term traders and corporate traders dominates the price determination on the ex day

new evidence that taxes affect the valuation of dividends this paper uses british data to examine the effects of dividend taxes on investors relative valuation of dividends and capital gains british data offer great potential to illuminate the dividends and taxes question since there have been two radical changes and several minor reforms in british dividend tax policy during the last 30 years studying the relationship between dividends and stock price movements during different tax regimes offers an ideal controlled experiment for assessing the effects of taxes on investors valuation of dividends using daily data on a small sample of firms and monthly data on a much broader sample we find clear evidence that taxes affect the equilibrium relationship between dividend yields and market returns these findings suggest that taxes are important determinants of security market equilibrium and deepen the puzzle of why firms pay dividends financial economists have long been puzzled by corporate dividend behavior many individual investors should value a dollar of corporate dividends less than a dollar of corporate retentions because the former gives rise to greater tax liabilities corporations however face equal costs of paying out dividends and retaining earnings miller and modigliani 31 demonstrated that in the absence of taxes dividend policy should have no effect on share valuation if dividends are tax penalized however a value maximizing firm should pay no dividends widespread dividend payments to taxable investors are therefore surprising in 1981 dividend tax revenues in the united states were estimated to exceed 20 billion dollars indeed some have interpreted the large volume of dividends paid as evidence against the rational behavior postulates typically used by economists the dividend question has stimulated a large theoretical and empirical literature concerned with the qluestion of investors valuation of dividends in particular the question of how taxes affect the market valuation of dividends has generated considerable controversy numerous studies including auerbach 2 litzenberger and ramaswamy 24 26 morgan 34 and rosenberg and marathe

labour and productivity it has long been commonplace to claim that trade unions and worker attitudes are important constraints upon the level and growth of productivity such problems are seen to be especially acute in britain arguments of this kind are to be found in the early stages of the industrial rev olution and have been voiced on numerous occasions ever since the debate over the relation ship between labour and productivity has been considerable over the last two decades first with moves to reform workplace industrial relations and more recently with a variety of legislative and market based initiatives drawing upon a variety of theories this paper seeks to explore a number of organisational characteristics which may help to explain the relationship between labour and productivity

the value of dividend imputation tax credits in australia abstract a dividend imputation tax system provides shareholders with a credit for corporate tax paid that can be used to offset personal tax on dividend income this paper shows how to infer the value of imputation tax credits from the prices of derivative securities that are unique to australian retail markets we also test whether a tax law amendment that was designed to prevent the trading of imputation credits affected their economic value before the amendment tax credits were worth up to 50 of face value in large high yielding companies but subsequently it is difficult to detect any value at all

equitable cost benefit analysis of climate change greenhouse gas emissions and vulnerability to climate change show a strong negative correlation this is the moral issue at the heart of the climate problem however little attention has been paid to this in the literature see banuri et al 1996 for an overview the literature on equity issues in climate change is largely confined to the distribution of emissions reduction targets this literature takes the need to reduce greenhouse gas emissions for granted and takes a parametric approach to the required reductions on the other hand the literature that tries to derive how much emissions abatement is desirable largely ducks the equity issue this paper is an attempt to combine the two problems

equitable cost benefit analysis of climate change policies the literature of welfare maximising greenhouse gas emission reduction strategies pays remarkably little attention to equity this paper introduces three ways to consider efficiency and equity simultaneously the first method inspired by kant and rawls maximises net present welfare without international cooperation as if all regions share the fate of the region affected worst by climate change optimal emission abatement varies greatly depending on the spatial and temporal resolution that is the grid at which maximum impact is defined the second method is inspired by varian s no envy emissions are reduced so as to equalise total costs and benefits of climate change over all countries of the world and over all time periods emission reductions are substantial this method approximately preserves the inequities that would occur in a world without climate change the third method uses non linear aggregations of welfare the utilitarian default is linear in a cooperative setting this method cannot distinguish between sources of inequity the higher the aversion to inequity the higher optimal greenhouse gas emission reduction

portfolio rebalancing and the effective taxation of dividends and capital gains following the tax reform act of 1986 abstract the tax reform act tra of 1986 among other things equalized the nominal taxation of dividend and capital gains income the evidence is consistent with the hypothesis that ordinary investors rebalanced their portfolio holdings in response to the new taxes such rebalancing appears to have concentrated on liquid stocks indicating that transaction costs are an important consideration for ordinary investors involved in restructuring their portfolio holdings the tax clientele relationships that existed prior to the new act were distorted temporarily but have reappeared by 1988 interestingly investors post reform effective tax rates still give a preference to capital gains as they did prior to the tax reform

the ex dividend day behavior of stock prices a re examination of the clientele effect a comment in a recent article in this journal kalay 5 has written an extensive comment on our 1970 article 2 concerning marginal stockholder tax rates and the clientele effect while we are flattered that our article is viewed of sufficient importance to gain this attention 12 years after it was written we do have reservations about kalay s comments we are principally concerned with his interpretations of relevant transaction costs and the role they play in setting equilibrium

the ex dividend day behavior of stock prices the case of japan we provide a comprehensive empirical analysis of stock price behavior around the ex dividend day in japan we find that prices rise on the ex day and that dividend related tax effects appear to be secondary returns around ex dividend days are dominated by the proximity of many ex days to the fiscal year end excess returns of 1 percent which are independent of any dividend related considerations are higher than round trip transaction costs on medium sized transactions prices seem to imply selling pressure before and buying pressure at the start of the new fiscal year these trading patterns appear to be motivated by intercorporate manipulative trading around the end of the firms fiscal year which are unrelated to dividends article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

reduction of constraints on arbitrage trading and market efficiency an examination of ex day returns in hong kong after introduction of electronic settlement previous research documents positive ex dividend day returns in excess of one percent in the unique institutional setting of hong kong where neither dividends nor capital gains are taxed short term arbitrage trades around the ex day were hampered by physical settlement procedures after the recent switch to an electronic settlement system which enables such trades ex day abnormal returns have declined to an insignificant 0 17 percent this drop is more pronounced for high yield stocks which are more likely to attract dividend capture trading the evidence points to the crucial role of short term traders in ensuring the pricing efficiency of financial markets the role of short term traders in financial markets is a matter of considerable controversy the debate on this issue has heightened in the wake of the recent asian currency crisis which some governments blamed on the activities of short term traders critics contend that short term traders engage in speculation leading to excessive and debilitating volatility in market prices others argue that short term traders perform a useful role by increasing valuable liquidity berkman and eleswarapu 1998 report that regulatory changes on the bombay stock exchange curbing short term trading had a measurably adverse impact on asset values supporters of short term traders also argue that these traders make a key contribution to the efficiency of financial markets by constantly scouring the markets for arbitrage opportunities this study examines the impact of the

foreign and domestic investors and tax induced ex dividend day trading abstract this paper reports evidence on the consequences of differential tax treatment for domestic and foreign owners in a market with a high degree of foreign ownership for certain stocks the helsinki stock exchange hse we find that ex dividend day ratios vary with the degree of foreign ownership and detect significantly abnormal ex dividend day trading volumes the average ex dividend price drops for high yield high foreign ownership stocks are likely to lie outside no arbitrage boundaries for domestic taxable investors an investigation of short selling through a derivatives instrument also reveals significant excess trading volumes in ex dividend months the tax heterogeneity of the company s ownership structure seems to play a role in explaining deviations from dividend neutrality more deviations are observed for companies with a more homogeneous ownership structure in terms of taxation

the valuation of american call options and the expected ex dividend stock price decline abstract this study focuses on the ex dividend stock price decline implicit within the valuation of american call options on dividend paying stocks the roll 1977 american call option pricing formula and the observed structure of cboe call option transaction prices are used to infer the expected ex dividend stock price decline as a proportion of the amount of the dividend the relative decline is shown to be not meaningfully different from one confirming some recent evidence from studies which examined stock prices in the days surrounding ex dividend

ex dividend stock price behavior and arbitrage opportunities this paper investigates the relation between ex dividend stock price behavior and arbitrage oppor tunities in a continuous trading frictionless economy the authors demonstrate that it is possible for the ex dividend stock price drop to differ from the dividend and still short term traders cannot gene rate arbitrage profits the argument is independent of transactions c osts the relevance of this insight to estimating the marginal tax br acket based on ex dividend stock price drops is explored furthermore this insight is also applied to the area of option pricing in which the special class of escrowed dividend stock price processes is stud ied the authors show that most elements from this class of stock pri ce processes generate invalid option pricing formulas copyright 1988 by the university of chicago

fair electricity transfer price and unit capacity selection for microgrids abstract microgrids are defined as an area of electricity distribution network that can operate autonomously from the rest of the network in order to achieve the best economic outcomes the participants in a microgrid can benefit from cooperation in microgrid design and operation in this paper a mathematical programming formulation is presented for fair optimised cost distribution amongst participants in a general microgrid the proposed formulation is based on the game theory nash bargaining solution approach for finding optimal multi partner cost levels subject to given upper bounds on the equivalent annual costs the microgrid planning problem concerning the fair electricity transfer price and unit capacity selection is first formulated as a mixed integer non linear programming model then a separable programming approach is applied to reform the resulting mixed integer non linear programming model to a mixed integer linear programming form the model is applied to a case study with a microgrid involving five participants

the effect of personal taxes on common stock prices the case of a belgian tax reform abstract this paper analyses how a belgian tax reform affected the relative pricing of securities with differential tax treatment of dividends the results show that stock prices reflect their relative personal tax advantage and the price differentials are significantly related to dividend yield

strategy structure and performance of korean business groups a transactions cost approach the authors use the transactions cost approach to analyze the diversification strategy and the resulting structure chosen by korean business groups to overcome market imperfections prevalent in developing countries business groups that have multidivisional struc ture are thought to show superior economic performance because such s tructure reduces transactions costs arising from organizational failure also major korean business groups have a relational structure showing both vertical integration and the characteristics of the conglomerate the authors modify the model of r e caves and m uekusa 1976 used for japan to obtain the empirical result tha t group affiliated firms show superior economic performance copyright 1988 by blackwell publishing ltd

options taxes and ex dividend day behavior a novel way of estimating the expected as opposed to the actual share price fall off is developed using option prices this method is applied to the uk traded options market using data from 1979 to 1984 the results show that a the average expected fall off implicit in option prices is around 55 to 60 of the dividend and significantly different from it the fall off also varied inversely with the dividend yield which is consistent with the prediction of the tax clientele hypothesis b the estimates of the expected fall off were not significantly different from the actual fall off c finally the results imply that the usual assumption made in valuing options on dividend paying stocks that the fall off is equal to the dividend would lead to downward biased estimates of the option value

return risk and yield evidence from ex ante data the purpose of this study is to investigate the relationship between return and yield in the context of ex ante data from the value line investment survey and by examining the role of dividends as a proxy for risk the use of ex ante data should substantially reduce the confounding of tax and information effects that has affected earlier studies heteroscedasticity is detected in the after tax capm and found to be negatively related to yield and positively related to beta maximum likelihood methods are used to correct for heteroscedasticity and generate efficient coefficient estimates using data for each of the years 1973 through 1983 there is an overall positive relationship between expected return and yield however coefficient estimates of yield are highly variable from year to year the relationship between dividend yields and security returns is currently a subject of extensive research in finance empirically a positive relationship is found by blume 5 gordon and bradford 12 elton gruber and rentzler

ex dividend day stock price behavior discreteness or tax induced clienteles abstract since prices are constrained to discrete tick multiples while dividends are essentially continuous ex day price changes will not equal dividends we argue that the expected price drop is strictly less than the dividend but within one tick of the dividend the price drop to dividend ratio will i be less than one ii increase with dividends generally and iii decline between tick multiples giving a sawtooth pattern in the data since dividends and dividend yields are highly correlated discreteness will give the impression of tax induced dividend clienteles even if there are none taxable cash dividends and nontaxable stock dividends exhibit similar ex day behavior

opportunism incentives and the m form hypothesis a laboratory study abstract opportunism is one central premise of the m form hypothesis this premise is investigated in a laboratory experiment using m form and u form organizations under incentives based on corporate profit and divisional profits there was greater opportunism under u form organization than under the m form and under divisional profit than under corporate profit incentives additionally a misguided altruism lead a number of individuals to misrepresent information the m form yields higher performance than the u form also corporate profit incentives yield higher total profit than divisional profit incentives the results partially explain why empirical studies do not strongly support the m form hypothesis

tax induced trading around ex dividend days abstract this paper investigates trading volume around ex dividend days for taxable distributions cash dividends it is found that trading volume increases significantly around the ex dividend day this increase is more pronounced for high yield actively traded stocks and after brokerage commissions became negotiable the results are consistent with the hypothesis that short term traders have an impact on ex day price behavior at least for taxable distributions for non taxable distributions stock splits and stock dividends we find negative abnormal volume around ex day

dividends taxes and common stock prices the ex dividend day behavior of common stock prices before the income tax this study examines the ex dividend day behavior of common stock prices before the enactment of the federal income tax on ex dividend days during the pre tax period stock prices fell on average by the full amount of the dividend the data are consistent with the hypothesis that i investors in the pre tax period value dividends and capital gains as perfect substitutes and ii the differential taxation of dividends and capital gains has since caused investors to discount the value of taxable cash dividends in relation to capital gains

risk premia and the ex dividend stock price behavior abstract it has been suggested that the positive abnormal return on ex dividend days may be due in part to the existence of a risk premium the evidence is consistent with the hypothesis that on ex dividend days trading in low dividend yield stocks is dominated by ordinary investors who demand a tax premium for their higher tax liability on ordinary dividends relative to capital gains trading in high dividend yield stocks appears to be dominated by short term traders who obtain a positive unsystematic risk premium finally the structural relationship between rates of return on the one side and dividend yield and risk premia on the other is quite different on ex dividend and other days as well as through time

tax reform and ex dividend day behavior this paper investigates the effect of a major canadian tax reform on the ex dividend day behavior of companies on the toronto stock exchange the results are inconsistent with the hypothesis that price changes on ex dividend days reflect the relative taxation of dividends and capital gains for the representative investor but are consistent with the hypothesis that ex dividend day price behavior reflects short term trading activities

investment and industrial expansion a corporate variables framework abstract the article proposes that firm investment and in turn industry expansion are determined by firm specific corporate variables in addition to the typically considered variables characterizing the firm s experience and expected conditions in a given market such as rate of growth of demand price and cost of capital defined to represent the internal characteristics of firms the particular corporate variables hypothesized to affect investment behavior include cash flow firm specific assets internal firm structure and corporate strategy the choice of the postulated corporate variables is motivated by the presence of factors associated with the failure or absence of markets an uncertain and complex environment the irreversibility of much capital investment information asymmetry and organizational boundaries

balancing contemporary fairness and historical justice a quasi equitable proposal for ghg mitigations abstract in this paper we analyze the impasse caused by polarizing positions of the united states and china in international negotiations on carbon mitigation by incorporating the bern carbon cycle module into the rice model developed by nordhaus and yang 1996 we set up a framework for tracking regional contributions to carbon concentration and to global climate change our proposal labeled the color preservation principle uses regional contribution share to global carbon concentration as the criterion for international cooperation through simulations in rice model with bern module rice b we examine the rationales of the arguments made by the united states and china we conclude that both countries standpoints are severely flawed to facilitate the global cooperation on carbon mitigations major concessions are needed from the two top carbon emitters

implications of the discreteness of observed stock prices stock prices on the organized exchanges are restricted to be divisible by 1 8 therefore the true price usually differs from the observed price this paper examines the biases resulting from the discreteness of observed stock prices it is shown that the natural estimators of the variance and all of the higher order moments of the rate of returns are biased an approximate set of correction factors is derived and a procedure is outlined to show how the correction can be made the natural estimators of the beta and of the variance of the market portfolio on the other hand are nearly unbiased the behavior of stock prices has been an issue of interest to the financial economist for many years this interest resulted in a growing number of empirical studies which attempt to estimate this behavior e g blattberg and gonedes 2 fama 6 fama and roll 7 8 barnea and downes 1 to date stock price behavior is estimated under the assumption that the observed trading price is the true equilibrium price however observed stock prices and stock price changes on the organized exchanges are restricted to multiples of 1 8 of a dollar 1 therefore if the true distribution of stock prices is continuous an observed trading price can be different from the true price this paper examines the biases in estimating the moments of stock price changes caused by the discreteness of observed stock prices the major focus of the paper is in noting this problem providing a model which explains the source of these biases and quantifying their size section i demonstrates that due to the discrete nature of observed stock prices the natural estimators for the variance and for the higher order moments of the rate of returns are biased upward this bias is larger for stocks with lower prices and smaller standard deviation for instance assuming that the standard deviation a is 0 001 the stock price is one dollar the true probability distribution of stock prices is lognormal and the observed prices are as close as possible to the true prices then the natural estimator of r has expectation 0 01400 hence it is biased upward by 1300 significant biases have important implications in option pricing we derive an approximate set of correction factors which can be applied to the

internal capital market controls and financial performance in multidivisional firms it is proposed that within the population of m form firms the control systems necessary to realize economic benefits from interrelationships between subunits o f a firm are incompatible with the systems necessary to realize benef its from an m form type internal capital market this hypothesis is t ested on 156 large u k firms questionnaire data are used to classif y the firms according to their internal control characteristics the findings provide tentative support for the hypothesis copyright 1988 by blackwell publishing ltd

volume for winners and losers taxation and other motives for stock trading capital gains taxes create incentives to trade our major finding is that turnover is higher for winners stocks the prices of which have increased than for losers which is not consistent with the tax prediction however the turnover in december and january is evidence of tax motivated trading there is a relatively high turnover for losers in december and for winners in january we conclude that taxes influence turnover but other motives for trading are more important we were unable to find evidence that changing the length of the holding period required to qualify for long term capital gains treatment affected turnover investors responding to the tax incentives in the capital gains laws should produce predictable patterns in the volume of trading in a stock but not necessarily in its price this study uses past price patterns as a proxy to measure the incentives to sell or avoid selling a stock and observes trading volumes to estimate the extent to which investors respond to these incentives past price patterns may influence trading volumes for other non tax related reasons as well these are also considered we find that past prices influence current incentives to trade through both tax and non tax motives winners tend to have higher abnormal volumes than losers this would be expected if non tax related motives were predominant however the influence of tax related motives on trading volume is shown by seasonal variations in the relationship between past price changes and turnover as predicted by tax induced trading theories the volume of losers is higher than normal in december and the volume of winners is higher than normal in january we found no evidence that trading volume was affected by changes in the length of the holding period required to qualify for long term capital gains investors reactions to capital gains taxes are important for several reasons first a comprehensive understanding of investor behavior would include both price and volume understanding the relationship between taxes and volume is a fruitful and convenient method of contributing to this subject the resource allocation consequences of capital gains taxes are controversial in part because

a microstructure analysis of ex dividend stock price behavior before and after the 1984 and 1986 tax reform acts this article extends ex dividend research by explicitly modeling trading at bid and ask quotations this refinement distinguishes between buying and selling for long term investors and short term dividend capture traders it also explicitly incorporates the bid ask spread and eliminates some potential measurement errors that may bias returns marginal conditions are tested during 1983 and 1988 periods that span the 1984 and 1986 tax reform acts results for long term investors are consistent with the elimination of favorable capital gains tax rates at observed prices tax neutral short term traders cannot profit corporate dividend capture traders face profit opportunities during 1983 that disappear by 1988 copyright 1996 by university of chicago press

the adoption of the m form organizational structure a test of imitation hypothesis the study of organizational adoption of administrative innovations has been generally guided by the imitation hypothesis this hypothesis states that within a relevant population of firms an innovation is first adopted by a select few innovators who communicate and influence others to adopt it resulting in a predictable diffusion pattern using data on the adoption of the m form organizational structure this paper reexamines this hypothesis based on the reported results we cannot reject the null hypothesis that organizational adoption of administrative innovations is characterized by a white noise process this result brings into question the appropriateness of the imitation hypothesis limitations and implications of the results are discussed

dividend capture in nasdaq stocks abstract we examine the importance of dividend capture trading in nasdaq stocks by testing for cross sectional relations between ex day abnormal returns and bid ask spreads throughout we find that ex day returns and spreads are positively related the relation increases across dividend yield quintiles and is strongest in high yield stocks the relation does not appear in a sample of non ex dividend days these findings indicate that dividend capture trading affects the ex day returns of at least some particularly high yield nasdaq stocks and that dividend capture trading is important for understanding ex dividend day returns

internal organization and economic performance an empirical analysis of the profitability of principal firms business historians have long been aware that organizational innovations have had remarkable productivity ramifications a h cole has asserted that if changes in business procedures and practices were patentable the contributions of business change to the economic growth of the nation would be as widely recognized as the influence of mechanical inventions 9 pp 61 62 some economists have come to recognize the role of organizational innovation kenneth arrow noting that truly among man s innovations the use of organization to accomplish his ends is among both his greatest and earliest 2 p 2441 oliver williamson 271 has further championed the study of organizational innovation doing much to provide the theoretical underpinnings necessary to bring the topic into the corpus of economic theory furthermore richard caves has observed that both corporate strategy and organizational structure influence the economic performance of the firm and the market in which it sells 6 p 641 however structural parameters are absent from the neoclassical theory of production which masquerades as the economic theory of the firm developments in the theory of the firm are unlikely to accommodate organizational structure considerations until connections between structure and performance have been demonstrated empirically the purpose of this paper is to explore the relationships between a particular kind of decentralized and divisionalized internal hierarchical structure what oliver williamson has called the m form innovation 27 ch 81 and firm profitability in essence the methodology involves examining the differential performance between the m form innovator in an industry and its principal rival application of two non parametric statistical tests the sign test and the wilcoxon matched pairs signed ranks test is supportive of the hypothesis that the m form structure is associated with superior firm

network prominence bargaining power and the allocation of value capturing rights in high tech alliance contracts we suggest and provide empirical evidence that the bargaining power of alliance partners stemming from their prominence in alliance networks influences the ex ante allocation of value capturing rights in high tech alliance contracts network prominence can enhance the availability of alternative partners for a firm and thereby elevates the firm s bargaining power and enables the firm to receive i more value capturing rights vis a vis its partner i e more net value capturing rights and ii more rights to the unexpected outcomes vis a vis its partner we empirically investigate the content of research and development r d collaboration contracts between biotech and pharmaceutical firms and show that as the prominence of the client i e pharmaceutical firm increases it is able to attain i more net value capturing rights to outcomes within the area of collaboration and ii more rights to unexpected outcomes by contrast increased prominence of the r d firm i e biotech firm decreases both t

an examination of ex dividend day stock price movements the case of nontaxable master limited partnership distributions this study examines the unit stock price and volume behavior of master limited partnerships mlp around the ex dividend day since the dividends of mlps are not taxable to the unitholder tax based hypotheses predict no abnormal unit movements around the ex day significant positive excess returns and volume are found before the ex dividend day and significant negative excess returns are found on the ex dividend day the findings which are not significantly impacted by the tax reform act of 1986 suggest ex day stock movements are not solely a function of investor marginal tax rates or corporate trading behavior elton and gruber s 1970 findings that in 1966 67 stock prices fell on average by less than the amount of the dividend on the ex dividend date and that the ratio of the price decrease to the dividend was correlated with the dividend yield have led to the development of a tax clientele hypothesis relating to investor behavior one puzzling result from their study was the finding that the price decreases for the highest yielding securities were significantly greater than the dividends which in their analysis implied an investor clientele with negative tax rates while michaely 1989 using 1986 87 data was unable to find support for the tax clientele hypothesis across different yield groups he also documented the large price drop for the highest yielding securities michaely 1989 suggested that his results may demonstrate a preference of corporations for dividend over capital gains because of favorable tax treatment corporations receive on dividend income corporate trader hypothesis shefrin and statman 1984 however suggest that preferences for dividends over capital gains may exist for nontax reasons such as self control or a desire to segregate gains and losses the purpose of this paper is to examine the ex dividend day stock price behavior of master limited partnership mlp units during the 1985 88 period dividends from these high yielding securities are not taxable therefore support for either the tax clientele hypothesis or the corporate trader hypothesis would be found only if the average ex day price change on mlps equalled the dividend this result would also be consistent with barclay s 1987 finding that before the enactment of an income tax in 1913 even high

hierarchies and markets abstract whereas previous empirical studies have found performance gains from the adoption of multidivisional organization in u s and u k companies this paper reports a reduction in profitability for german m form firms for several years following reorganization with no sign of an eventual positive gain these results emerge from a cross section analysis of 48 among the top 100 german companies we suggest the constrasting results may flow from certain legal and institutional features not present in the u s and u k attenuating potential gains and enlarging short run transactions costs these include the role of the banks the relative concentration of shareholdings and the dual system of company boards

internal organization and firm performance an analysis of large uk firms under conditions of economic uncertainty the relationship between firm performance and internal characteristics is examined in a sample of large uk firms the way in which organizational form internal control mechanisms and transitional costs affect profitability is examined performance is measured relative to the industry average with firms earning in excess of this being identified as being profit driven a sensitivity analysis is undertaken using two and three times industry average profits as alternative dependent variables logit analysis was used to estimate the relationships it was found that organisational form had no significant effect on profitability the separation of decision management from decision control increased the probability of earning more than twice industry average profits however for firms which had undertaken a structural reorganization within the three previous years the probability of earning more than twice industry average profits is reduced it was also found that firms which had a majority of executive direc

profitability transactional alignment and organizational mortality in the u s trucking industry the winds of creative destruction rarely blow more fiercely than in a newly deregulated environment managers simultaneously face a novel focus on operating efficiency and an onslaught of new competitors what must managers do to enable their firms to survive in such an environment what factors bear on firms survival this paper presents an analysis of mortality of large motor carriers in the u s interstate for hire trucking industry after deregulation it examines this phenomenon through a multidisciplinary lens that encompasses organizational ecology neoclassical economics and transaction cost economics the paper posits that carrier mortality is a function of both firm level and industry level attributes which are drawn from both ecological and economic theories while each of these theories separately informs motor carrier mortality the inclusion of predictions derived from both disciplines in one model significantly increases explanatory power over either theory evaluated alone the empirical analysis is among the first to show increased mortality when firms do not adhere to operating policies consistent with transaction cost minimization principles in sum managers are well advised to adopt a multidisciplinary approach to strategy to ensure their firms survival 1997 by john wiley sons ltd

diffusion of the m form structure in the u k rate of imitation inter firm and inter industry differences abstract this paper presents the results of an empirical investigation of the diffusion of the multidivisional form structure among a sample of large u k quoted companies it is shown that the diffusion process resembles that reported for complex capital embodied innovations in the literature in cross sectional analyses the determinants of the delay in adoption are examined it is found that size diversification and less clearly merger intensity are significantly positively related to the speed of imitation in confirmation on the m form hypothesis inter industry differences are not generally found to be important apart from a manufacturing service distinction

a regional dynamic general equilibrium model of alternative climate change strategies outcomes and noncooperative equilibria this study finds that cooperative policies show much higher levels of emissions reductions than do noncooperative strategies that there are substantial differences in the levels of controls in both the cooperative and the noncooperative policies among different countries and that high income countries may be the major losers from cooperation jel h41 q4 q2 q20

technology strategy governance structure and interdivisional coordination abstract this paper studies how various organizational forms compare in their capacities to solve coordination problems created by technological interdependence between firms divisions i contrast the organizational mechanisms used by two firms ibm and general motors to address these problems while it is widely recognized that centralization distorts incentives facing division managers this paper highlights its benefits when there are large potential gains from agreement on technological standards the examples show how a centralized governance structure supported by lower powered incentives facilitates interdivisional coordination this suggests a refinement of the theory of organizational form based on how firms resolve the tensions between strategic planning and the measurement of organizational units performances