Advance Notification of Plant Closing: Does It Matter?

A review of the literature on the empirical effects of advance notification of plant closings (voluntary and mandated), including the authors' recent study using data drawn from the 1984 Survey of Displaced Workers. suggests that advance notice reduces the probalility that displaced workers suffer any spells of unemployment and may also moderated temporary increases in area unemployment rates. There is little evidence of adverse effects of advance notice, either to workers or to firms. The implications for public policy are discussed.     

An Investigation of Market Microstructure Impacts on Event Study Returns

We investigate the importance of bid-ask spread-induced biases on event date returns as exemplified by seasoned equity offerings by NYSE listed firms. We document significant negative return biases on the offering day which explain a large portion of the negative event date return documented in the literature. Buy-sell order flow imbalance is prominent around the offering and induces a relatively large spread bias. If order imbalances are suspected, the researcher can use returns calculated from the midpoint of the closing bid and ask quotes instead of returns calculated from closing transaction prices to avoid this return bias.     

Capital Asset Pricing Compatible with Observed Market Value Weights

We show that the set of expected return vectors, for which an observed portfolio is mean variance (MV) efficient, is a two-parameter family. We identify ten ways to specify the time series behavior of the two parameters; the result highlights a number of inconsistencies involved in MV modelling. For each of the cases, it permits the inference of the time series of expected return vectors, as well as all the other Capital Asset Pricing Model (CAPM) variables, compatible with a known covariance matrix and the observed time series of market value weights. The empirical work shows that there are substantial case-to-case differences in the time series of mean vectors and many of them are quite different from the constant mean vector envisioned in tests of the CAPM.     

Defensive Mechanisms and Managerial Discretion

We study a model where firms may possess free cash flow and takeovers may be disruptive. We show that the possibility of a takeover, combined with defensive mechanisms and the ability to pay greenmail, can solve the free cash flow problem in an efficient way. The payment of greenmail reveals information that generates a stock price decline that exceeds the value of the greenmail payment, even though the payment of greenmail is value maximizing. Optimal defensive measures limit takeover attempts if the target stock price is too low. We also provide cross-sectional implications of the analysis.     

A Re-Examination of Shareholder Wealth Effects of Calls of Convertible Preferred Stock

Common stock price reactions to announcements of 67 calls of in-the-money convertible preferred stocks are examined, and a significant average abnormal return of ?1.6 percent is documented. The finding is robust to the choice of estimation period and the assumed return-generating process. Annual dividend obligations for the called preferred issues in the sample typically are greater than the dividends for the common shares into which they are converted, and announcement-period abnormal returns are negatively correlated with changes in dividends. Moreover, calls that result in dilution of voting rights appear to have greater adverse valuation effects than calls that do not alter voting rights concentration.     

Accounting for Forestry Assets: Current Practice and future Directions

Discussion Paper 23 and Exposure Draft 83, dealing with self-generating and regenerating assets, have been positive steps in the development of accounting for foresty operations. DP 23 was successful in canvassing a wide range of relevant issues. Its most significant recommendations relate to the measurement of foresty assets - but there emerges a problem: no concepts statement on measurement generally has been developed and in its absence the DP 23 and ED 83 recommends ti0 ns appear premature.