Do Banks Follow Their Customers Abroad?

The market share of US business loans made by foreign‐owned banks has increased dramatically since 1980. At the same time, foreign direct investment in the US rose, so that much of the growth in foreign‐owned US‐based bank lending to businesses in the US could conceivably be accounted for by an increase in loans to the nonbank US affiliates of firms headquartered abroad, an expectation consistent with the conventional wisdom that banks "follow their customers" abroad. Our study investigates the lending patterns of US‐based banks from Japan, Canada, France, Germany, the Netherlands, and the UK, countries that account for the vast majority of foreign bank activity in the US. Simultaneously, we look at the borrowing patterns of nonbank US affiliates of firms from those countries. We find that banks from four of the six countries (Japan, Canada, the Netherlands, and the UK) allocated a majority of their loans to non‐home‐country borrowers for some or all of the 1981–1992 period. These findings suggest that the "follow the customer" hypothesis may have a more limited applicability than previously supposed.     

The selling and seasoning of investment company offerings

This article investigates the initial and subsequent pricing of Closed-End Investment Company (CEIC) shares offered to the public from 1986 through 1987. Unlike other equities, these showed no abnormal price appreciation at the offering; however, the new CEICs experience significant price declines in the 20 weeks following the offering. The evaporation of the initial premium begins approximately four weeks after the offering date, a lag that coincides with the period of time during which underwriters may cease supporting share prices in the secondary market.The authors thank John D. Jackson, Sam Peltzman, and two anonymous reviewers for their helpful comments.     

Antitrust Issues in Defining the Product Market for Hospital Services

In this paper we examine the standard product market relied on by the courts and antitrust agencies in hospital mergers-acute care, inpatient services-and consider whether narrower or broader alternatives may be more appropriate to assess the competitive effects of a hospital merger. To examine how much disaggregation of the standard product market definition may matter for the definition of relevant geographic markets and concentration, we considered patient flows and concentration for the overall inpatient 'cluster' and more disaggregated categories of service for two regions of California: San Luis Obispo and Sacramento. We find that a disaggregated approach may involve a relatively small number of inpatient service categories, that the overall cluster masked some variability in the underlying patient flows by service category, and that in San Luis Obispo, the overall cluster masked considerable detail in concentration at the service category level, which appeared to have been much less true in Sacramento.     

The 2004 Sumatra earthquake and Indian Ocean tsunami: What happened and why?

The December 26, 2004 Sumatra earthquake and the tsunami that followed killed over 300,000 people. In this paper, we analyze and discuss the geologic causes for this earthquake, the mechanisms that generated it, and follow up with a discussion on ways to prevent this type of disaster in the future.     

Capital Gains Taxes and Stockholders' Response to Dutch Auction Tender Offers

Capital gains taxes are conjectured to explain upward sloping supply curves in tender offers. This paper analyzes expiration day returns in Dutch auction tender offers to examine this conjecture. A proxy measure for the capital gains of the marginal tendering stockholder is constructed, based on tender offer size and daily price-volume history for one year. Cross-sectional regressions suggest that the tender price increases with the capital gains of the marginal tenderer, but only for firms with low institutional holdings. This is consistent with capital gains tax effects being relevant only when tax-exempt holdings are low.     

Is Occupational Injury Risk Higher at New Firms?*

This paper studies whether newly created firms have higher injury rates than established firms. We use data on a large sample of single‐establishment firms in Pennsylvania from 2001–2005 to examine the relationship between firm age and the risk of lost workday injuries. Using the full set of firms, there appears to be little overall correlation between firm age and risk. If anything, newer firms appear less likely to have lost workday injuries. When we condition on having at least one injury reported in 2000, however, we find that in later years the injury risk of firms declines with age. This pattern is consistent with systematic underreporting of injuries by new firms.     

Do Poorly Governed Acquirers Transfer Wealth to Targets in Cross‐Border Acquisitions?

We use the number of antitakeover provisions (ATPs) as a proxy for corporate governance and examine its impact in US domestic and foreign acquisitions made by US acquirers. We find that the targets of poorly governed acquirers earn higher postannouncement premiums, despite controls for deal characteristics, macroeconomic conditions, and country‐level protections, suggesting that these acquirers overpay. Puzzlingly, in contrast with the domestic US findings of Masulis, Wang, and Xie, poorly governed acquirers in cross‐border deals experience higher announcement period returns. The relation between governance and target returns appears concave, but this nonlinearity disappears once differences in country‐level governance and deal characteristics are accounted for.     

The design of coordination and control mechanisms for managing joint venture–parent relationships

Joint ventures (JVs), defined as independent organizations formed by the pooling of resources and sharing of equity by two or more firms, are being formed at an increasingly rapid pace. While much empirical research has examined the conditions which favor the formation of JVs, less attention has been paid to the equally important issues of control and implementation which are the focus of interest in this study. We identify two factors which are expected to influence the design of control mechanisms, i.e., (1) the strategic interdependence between the JV and each parent and (2) the environmental uncertainty faced by the JV. Our empirical examination confirms the importance of the degree of strategic interdependence and the moderating role of environmental uncertainty in explaining the design of control mechanisms. © 1998 John Wiley & Sons, Ltd.     

The elusive relation between pension discount rates and deficits

The relation between defined-benefit (DB) pension discount rates and funding status is more complex than it might first appear. Existing evidence suffers from estimation biases that make precise inference unreliable. We document the biases and quantify their impact on inference in relation to corporate window-dressing of DB funding status. Our empirical evidence from the United Kingdom suggests that pension sponsors use discretion in the choice of pension discount rate not only to reduce reported deficits but also to reduce reported surpluses.