subjective stochastic dominance put writing and stock purchases with extensions to option pricing and portfolio composition initially an investor has the choice of two risky assets writing a european put option or buying the underlying share under broad conditions a risk averse investor will be subjectively better off writing the put when homogeneous expectations are invoked an upper bound for the put premium is obtained a numerical example using the lognormal density function illustrates the broad conditions for risk averters subjectively preferring the put writing strategy additional conditions permit this preference for writing puts to be extended to the portfolio context transactions costs only reinforce this preference in the one period horizon considered

management turnover and product market competition empirical evidence from the u s newspaper industry we examine the relationship between management turnover and market structure for newspapers in 50 large cities from 1950 to 1993 we find that competitive markets display greater turnover rates than monopolistic markets and that turnover rates are increasing in the degree to which a newspaper trails its competition in market share we find no evidence that the turnover performance relationship varies with market structure we discuss the implications of these findings for theories concerning competition and managerial employment contracting the results appear most consistent with the hypothesis that the greater likelihood of liquidation in competitive markets leads to elevated turnover rates copyright 2000 by university of chicago press

savings and loan and finance industry pac contributions to incumbent members of the house banking committee this paper examines the relationship between campaign contributions from savings and loan and finance industry pacs and membership on the house banking committee the distinguishing features of this paper are that we focus on campaign contributions at an industry level and we use regression analysis to determine whether membership on the house banking committee the committee with oversight responsibility for the savings and loan industry influences the level of contributions received by an individual legislator we find that members of the house banking committee do receive significantly greater contributions from the savings and loan and finance pacs than do other members of congress and that being chairman of the house banking committee also pays a dividend

an empirical investigation of paradoxes reswitching and reverse capital deepening in capital theory this paper examines the empirical relevance of the capital controversy the price model of sraffa and the dual models of the price and quantity systems of von neumann become the basis of the investigation in the course of the controversy it proved easy to construct theoretical examples which contradicted the fundamental neoclassical hypothesis of an inverse capital demand function this paper presents empirical examples for the first time thiry two input output tables from the oecd database serve as data as a result one envelope is found which involves reswitching reverse substitution of labour or reverse capital deepening are observed in about 3 65 of tested cases they involve at least two switchpoints copyright 2006 oxford university press

deposit insurance reform what are the issues and what needs to be fixed abstract the current problems in the commercial banking industry have led to widespread calls for reform of the deposit insurance contract on the grounds that it promotes moral hazard we review the empirical evidence for the significance of moral hazard as an important cause of the present crisis we then evaluate various reform proposals grouped into two broad classes proposals that seek to impose greater discipline on bank stockholders and proposals to increase the disciplinary role of bank debtholders finally we identify some issues that have received inadequate attention in the literature on bank regulation

accounting window dressing and template regulation a case study of the australian credit union industry this article documents the response of cooperative institutions that were required to adhere to new capital adequacy regulations traditionally geared for profit maximising organisations using data from the australian credit union industry we demonstrate that the cooperative philosophy and internal corporate governance structure of cooperatives will lead management to increase capital adequacy ratios through the application of accounting window dressing techniques this is opposite to the intended purpose of template regulation aimed at efficiently increasing operating margins and lowering risk our results raise several debatable issues regarding the ethics of accounting management and the imposition of one shoe fits all external regulation

a study of the corporate governance of thrifts we study corporate governance within the thrift industry during a period of industry distress and legally mandated regulatory vigilance we find evidence consistent with the office of thrift supervision displacing the disciplinary role of takeovers in the market for thrift control poorer prior thrift performance is associated with a greater likelihood of censure while better prior performance is associated with a greater likelihood of acquisition for thrifts that are not censured or acquired there is no relationship between current performance and managerial turnover replacement due to retirement rather than board discipline explains most of these turnovers this result is consistent with the notion that regulation may deter board disciplinary behavior also suggested by kole and lehr journal of financial economics 52 1999 79

governance form and organizational adaptation lessons from the savings and loan industry in the 1980s this paper explores how governance form affects the organizational capacity for adaptation we make a general case about the importance of governance in adaptation and we identify three mechanisms through which governance form may affect organizations ability to manage the competency and failure traps that often frustrate the process we look for evidence of these mechanisms through a study of the u s savings and loan s l industry in the 1980s this is an apt context because s ls were confronted by severe environmental changes that suggested a need for change of a relatively radical sort during this decade and because the industry contains a mix of governance forms stock form firms and mutual associations we examine whether mutuals and stocks differed in their propensity to move away from their traditional business and mission of residential mortgage lending in response to the challenges of the 1980s we also consider whether stocks and mutuals differed in their performance outcomes during this decade results indicate that mutuals were slightly less prone toward change but were in no sense inertial they also show that mutuals performed better overall and appeared to change more successfully than did stock firms the overall pattern of results suggests that mutual governance was a resource that allowed s ls to better balance exploration and exploitation in the face of a changing and ambiguous environment we consider the broader implications of these findings for research on organizational adaptation governance form and governance more generally

organizational form and risk taking in the savings and loan industry abstract i hypothesize that risk taking is greater in stock thrifts than in mutual thrifts because the residual and fixed claims are separable i find that stock thrifts exhibit greater profit variability during the 1982 1988 period and that conversions from mutual to stock ownership are associated with increased investment in risky assets and increased profit variability these findings illustrate the relation between the structure of residual claims incentives and firm performance as well as the unintended consequences resulting from changes in thrift regulations

innovation spending and productivity growth in the german economy 1980 1986 a newly developed technique involving vertically integrated input output sectors is used to examine the relationship between labour productivity and innovation expenditures in the german economy during the period 1980 to 1986 the productivity measures used dubbed harrod robinson read hrr take into account the direct and indirect labour used in each consumption goods sector included in these measures is the labour content of new capital investment the hrr measures show higher rates of productivity growth in most sectors compared to the simple direct labour requirements measures this is due to the fact that the hrr measures take into account the increased efficiency with which new capital is produced the second part of the study examines the relationship between labour productivity and innovation expenditures as measured by the ifo institute for economic research munich innovation survey using cross section data for 58 german industries a strong correlation was found between direct labour pr

the s l debacle public policy lessons for bank and thrift regulation this book describes the period of failures of savings and loan associations and sets out a program of policies to prevent future debacles it explains the regulatory actions and inactions that created the incentives for large numbers of thrifts to make excessively risky and ill conceived and in some cases fraudulent and criminal investments it describes the failure of the accounting system to provide adequate information to regulators and in many cases even to the managers of the thrifts themselves concerning the health and riskiness of individual thrifts it also discusses how the regulatory system that had been conceived in an earlier and highly regulated era was overwhelmed in the deregulated environment of the early 1980s it shows how the reforms that were made in response to the growing crisis were too little and too late and finally it offers a set of policy reforms that could prevent future crises in the savings and loan industry this work should be of interest to political and financial economists

the aggregate production function is not neoclassical standard postulates concerning the aggregate production function are about marginal productivities and the associated demands for labour and capital these demands are supposed to be negatively related to the factor prices namely the wage rate and the interest rate the theoretical cases in which these neoclassical properties fail to hold are regarded as anomalies we compute the aggregate values for production capital and labour and find that the neoclassical postulates do not hold for the detailed dataset that we consider the obvious implication of this result is that the models and analysis based on the aggregate neoclassical production functions are ill founded as they are based on something that does not exist

three paradigms for the role of capitalization requirements in insured financial institutions standard models for deposit insurance strike analogies to more familiar financial contracts and conceive of risk as exogenous the oldest model of deposit insurance likens it to passively underwriting casualty insurance a more sophisticated but still bilateral model likens deposit insurance to writing a passive put option on the enterprise whose funding is insured delays in acknowledging the wreck of the s l industry and its federal insurer fslic discredit these models as guides to managing a deposit insurance fund deposit insurance is better interpreted as a trilateral performance bond that enhances the credit of an insured institution this interpretation endogenizes risk emphasizes incentive conflict and underscores the need to optimize loss control activity the bonding model clarifies that a subset of the monitoring and disciplinary activities traditionally undertaken by government officials can usefully be privatized

why do companies pay dividends this paper presents a simple model of market equilibrium to explain why firms that maximize the value of their shares pay dividends even though the funds could instead be retained and subsequently distributed to shareholders in a way that would allow them to be taxed more favorably as capital gains the two principal ingredients of our explanation are 1 the conflicting preferences of shareholders in different tax brackets and 2 the shareholders desire for portfolio diversification we show that companies will pay a positive fraction of earnings in dividends we also provide some comparative static analysis of dividend behavior with respect to tax parameters and to the conditions determining the riskiness of the securities this abstract was borrowed from another version of this item

deregulation and the adaptation of governance structure the case of the u s airline industry deregulation provides a natural experiment for examining how governance adapts to structural changes in the business environment we investigate the evolution of governance structure characterized by ownership concentration compensation policy and board composition in the u s airline industry during a 22 year period surrounding the airline deregulation act of 1978 consistent with theory we nd that after deregulation i equity ownership is more concentrated ii ceo pay increases iii stock option grants to ceos increase and iv board size decreases airlines governance structures gravitate toward the system of governance mechanisms used by unregulated rms the adaptation process is gradual however suggesting that it is costly to alter organizational capital we also present evidence on the relation between governance structure and rm survival 1999 elsevier science s a all rights reserved jel classixcation g32 g38 j33 l93

bank regulation and the credit crunch abstract this study investigates the direct link between regulatory enforcement actions and the shrinkage of bank loans to sectors likely to be bank dependent we partition the shrinkage due to loan supply into the component due to explicit regulatory enforcement actions and that due to a voluntary response by bank management to low capital to asset ratios we find that banks with formal actions shrink at a significantly faster rate than those without even after controlling for differences in capital to asset ratios furthermore much of the reduced lending has been in categories containing primarily loans to bank dependent borrowers

option pricing bounds in discrete time upper and lower bounds are derived for call options traded at discrete intervals these bounds are independent of assumptions on the stock price distribution other than a restriction satisfied by the stock being non negative beta the development of the bounds relies on the single price law and arbitrage arguments both single period and multiperiod results are produced and put option bounds follow by extension the bounds exist as equilibrium values given a consensus on stock price distribution they are also valid for empirical studies being adjustable for dividends and commissions following the impetus of the black scholes pricing model the majority of option analyses have been in continuous time such approaches have relied on the formation of perfect riskless hedges involving the option its underlying security and a riskless asset since the hedge must be continuously revised and maintained while actual trading opportunities are discrete this crucial assumption limits the accuracy and applicability of the black scholes and related formulae in fact the black scholes formula can only be considered as a valid approximation to the discrete time solution merton 8 p 663 while the closeness of that approximation has not been ascertained in general 1 earlier discrete models such as boness 3 and samuelson 12 have been succeeded by those of brennan 5 cox et al 6 and rubinstein 11 in which distributional restrictions are imposed on share returns usually the discrete formula converges to the black scholes expression under appropriate limit conditions using the rubinstein 11 approach we derive upper and lower bounds for option prices with both a general price distribution and discrete trading opportunities the bounds are functions of the share and exercise prices the riskless rate of interest the distribution of the share price change per period and the number of periods of expiration of the option the lower bound is tighter than that of merton 7 derived from more general arbitrage considerations while being less exact than the results already mentioned for restricted distributions

stochastic dominance and expected utility survey and analysis while stochastic dominance has been employed in various forms as early as 1932 it has only been since 1969 1970 that the notion has been developed and extensively employed in the area of economics finance agriculture statistics marketing and operations research in this survey the first second and third order stochastic dominance rules are discussed with an emphasis on the development in the area since the 1980s

asset returns and economic disasters evidence from the s l crisis abstract this paper shows that depositors lost confidence in fslic during the two years prior to passage of firrea legislation which recapitalized the deposit insurance fund in 1989 during this period promised returns on retail cds reflected the expected loss and return standard deviation on these securities in the absence of government insurance cross sectional analysis is used to estimate both the probability and the conditional price of risk associated with fslic default the results suggest that increased uncertainty about both output and inflation in this disaster scenario drove the price of fslic default risk to extremely high levels the results also indicate that the market for retail deposits is characterized by less than perfect arbitrage across geographical regions

the surrogate wage function and capital theory with measurement technological change induces a structural change in both the values tableau and the prices tableau of an economy the measurable change in the values tableau reveals the labor saving effect and the measurable change in the prices tableau reveals the cost reducing effect a measure preserving transformation between the values tableau and the prices tableau provides the basis for an unambiguous definition of the aggregate capital labor ratio notion as a function of the rate of profit the paper shows that the direction of shifts in the capital functions of an economy depend on the relative strength of the labor saving effect versus the cost reducing effect of technological change if the cost reducing effect of technological change is greater less than the labor saving effect then the capital labor ratio decreases increases and the system generates a rising falling tendency for the rate of profit

technological change in canada 1961 80 an application of the surrogate wage function this paper applies c ozol s surrogate wage function to canadian input output data to analyz e the general properties of technological change during the 1961 80 p eriod technological change manifests itself in the shifts of the est imated surrogate wage curves which indicate the changing capital and labor intensities of the production system the empirical results of this study imply that technological progress in canada is generally l abor saving over the entire 1961 80 period and capital saving over th e 1961 66 period the actual tendencies of the technological evolutio n investigated appear to be explained by the continuous mechanization of the production process

bank runs deposit insurance and capital requirements diamond and dybvig provide a model of intermediation in which deposit insurance can avoid socially undesirable bank runs we extend the diamond dybvig model to evaluate the costs and benefits of deposit insurance in the presence of moral hazard by banks and monitoring by depositors we find that complete deposit insurance alone will not support the first best outcome depositors will not have adequate incentives for monitoring and banks will invest in excessively risky projects however an additional capital requirement for banks can restore the first best allocation

on the international harmonization of bank regulation this paper offers a three way typology of bank regulation and examines the question of international harmonization for each category for economic regulation the danger is that harmonization could support and preserve domestic protectionist regulatory regimes but it could instead be a beneficial guise for lowering protectionist barriers the latter efforts should be encouraged for prudential regulation national regulation should be adequate to handle the extra stresses of international banking harmonization efforts e g the basle accord may offer only modest help but the accord may offer indirect help by limiting national governments competitive efforts implicitly to subsidize their banks risk taking activities finally for information regulation national regulation appears to be adequate and international harmonization does not appear to be necessary copyright 1994 by oxford university press

labour productivity and energy intensity in australia 1974 87 an input output analysis abstract energy and labour productivity in australia is examined using the notion of vertical integration in an input output framework results indicate a decline in productivity growth rates during the 1978 1982 period for both energy and labour energy productivity growth was negative during this period the productivity slowdown was pronounced in the natural resource sectors agriculture food products and minerals results indicate that movements in primary input efficiency are positively correlated suggesting that input complementarity may override substitution effects during macroeconomic shocks

alternative mechanisms for corporate control we examine performance and management characteristics of fortune 500 firms experiencing one of three types of control change internally precipitated management turnover hostile takeover and friendly takeover we find that firms experiencing internally precipitated management turnover perform poorly relative to other firms in their industries but are not concentrated in poorly performing industries in contrast targets of hostile takeovers are concentrated in troubled industries there is also weaker evidence that hostile takeover targets underperform their industry peers we interpret this evidence as consistent with the idea that the board of directors is capable of firing managers whose leadership leads to poor performance relative to industry but that an external challenge in the form of a hostile takeover is often required when the whole industry is in decline the evidence also indicates that firms run by a member of the founding family are less likely to experience either internally precipitated top management turnover or a hostile takeover on the other hand firms whose top management team is dominated by a single relatively young top executive while lacking in internal discipline are more likely to experience a hostile takeover this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item