The demise of the rights issue

This article suggests that the lack of use of rights offeringsin the United States, a phenomenon referred to as the equityunderwriting paradox, can be explained by transaction-cost conditions.A sample of underwritten rights offerings provides support forthe explanation. Firms making underwritten rights offeringspaid lower underwriter fees but incurred significantly largerprice drops just prior to the offering than did firms makingunderwritten public offerings. Further analysis reveals thatthe underwritten-rights-offering price concessions are a formof transaction cost that is not found in under-written publicofferings.     

Partial anticipation, the flow of information and the economic impact of corporate debt sales

Corporate debt sales have been regarded as 'no news' eventsbecause there is no significant price reaction on average totheir announcement. We explore the hypothesis that this lackof average price reaction to debt sale announcements is explainedby the partial anticipation of debt offers. Theory suggeststhat the demand for debt capital is fundamentally related tochanges in the sources and uses of funds, and we find evidencethat earnings are significantly lower, investment growth issignificantly bigger, and, for some issuers, debt refundingrequirements are significantly greater in the period immediatelyprior to issue than in periods well before and after the issue.We find that this preissue information conditions investors'expectations of issue, thereby affecting the cross-sectionalannouncement date price reaction to debt sales in two ways.First, announcement date price reactions are negative, on average,for unanticipated offers or for those offers where prior informationsuggests that an issue is unlikely. Second, holding the probabilityof issue constant, announcement date price reactions are significantlymore negative for offers that raise more capital than investorsexpected. These results are consistent with cash flow signalingand asymmetric information models of corporate financings.     

The state: Agent or proprietor?

This paper addresses the following question: Does characterizing the state to be an agent of its citizens provide a useful "as if" framework for positive analysis of economic policy? Or, can we understand economic policy only by explicitly characterizing the state as proprietary, the instrument of the ruling elite?     

The Role of Industry Effects in Simultaneous Reversal and Momentum Patterns in One-Month Stock Returns

When stocks are ranked by returns in one month, the portfolio of loser stocks tends to outperform the portfolio of winner stocks in the subsequent month. Yet industry portfolios tend to display momentum. We develop a model of information diffusion among agents with constrained information processing ability that reconciles these well-documented phenomena. We test whether this model or the overreaction hypothesis is consistent with the data. Additionally, a trading strategy based on the model outperforms strategies based on overreaction and on industry momentum. The strategy produces abnormal returns while controlling for market–risk and the size, book value, January, momentum, and liquidity effects.     

Firm Resources and Host‐Country Factors Impacting Internationalization of Knowledge‐Intensive Service Firms

In the era of the global economy, knowledge‐based services are becoming important sectors of the service industry. Services offered by a university are knowledge‐based services. Universities are in the service business, and they play a key role in creating and disseminating knowledge through teaching, research, and related services that cross domestic borders. The current research focuses on the internationalization of US MBA programs. The internationalization of US MBA programs refers to the delivery of knowledge‐based services beyond the domestic borders. The main objective of our research is to examine the effect of an organization's (e.g., a US business school) resources and a host country's attractiveness on the internationalization of knowledge‐based services offered by a firm (a US business school). Using data gathered from MBA programs of US colleges and universities, theÊstudy findings show that internationalization is influenced by human capital, prestige and reputation, management's willingness, and foreign market attractiveness. The results of this study offer practical insights for US business school leaders. © 2014 Wiley Periodicals, Inc.     

Butter and guns: Complementarity between economic and military competition

This paper analyses a general-equilibrium model of the complementarity between economic competition for the allegiance of subjects and military competition for the control of land. In our model economic competition between rival rulers for the allegiance of subjects results in their subjects, whether they are producers or soldiers, receiving incomes equal to the value of the marginal product of a producer. Furthermore, abstracting from destruction, military competition for the control of land, to the extent that it shifts some subjects from producing to soldiering, increases the value of the marginal product of a producer. Consequently, as long as military competition is not too destructive, the subjects of rival rulers have higher incomes with both military and economic competition than with economic competition alone. Economic competition for the allegiance of subjects causes rival rulers to bear all of the cost of allocating production to military competition and to bear more than the cost of the foregone production of soldiers. Received: April 1999 / Accepted: August 11, 2000     

Subsidizing unit donations: matches,rebates, and discounts compared

Experimental Economics - An influential result in the literature on charitable giving is that matching subsidies dominate rebate subsidies in raising funds. We investigate whether this result...