The valuation effects of overseas listings: The case of the Tokyo Stock Exchange

Shareholders of U.S. firms that listed stock on the Tokyo Stock Exchange from 1973 to 1989 are shown to have experienced no significant wealth gains. The pattern of the market's reaction to a Tokyo listing tracks closely the reactions to a domestic listing, where gains prior to listing are later erased. The findings indicate no advantages to a listing for a firm with a prior business presence in Japan, and they do not support the hypothesis of diminishing returns to foreign listings. The findings are consistent with the integration of international capital markets.     

National Judicial Power and the Dormant Commerce Clause

We develop a game in which a court monitors states as they regulatetrade among themselves. Contrary to commentators who see SupremeCourt oversight of state burdens on interstate commerce as theproduct of a powerfully ascendant court, we argue that the "dormantCommerce Clause" (DCC) originates as the strategic product ofan institutionally weak court. We provide three lines of argument.First, we refute the notion that merely observing the courtruling against state governments and those governments complyingwith its ruling is evidence of judicial power. Second, we showthat the equilibria of our "weak court" model directly impliesthe doctrinal contours of the DCC while the ascendancy hypothesisdoes not. Finally, we provide evidence that the court announceda weaker version of the DCC doctrine than sincerely preferredby pivotal justices on the court. Our arguments invite a revisedunderstanding of the role of the court in the development ofthe American political system.     

Budget regimes and internal governance: considerations for the sustainability of fiscal policy

In a fiscal policy set-up with Ricardian equivalence and rational expectations, the decision-making of private agents is based on the knowledge that current deficits will be met with future tax increases or spending decreases. This view requires that the government's budget exhibit intertemporal balance, or that fiscal policy be sustainable. This paper examines the extent to which sustainability holds in the light of changes in the institutional structure of the budget process and changes in internal House governance rules. The results indicate that certain aspects of sustainability are related to the underlying institutional structure and governance of the budget process. The authors wish to thank the editors and three anonymous referees for their thoughtful comments and suggestions. All remaining errors remain our own.     

VEHICLE CHOICE BEHAVIOR AND THE DECLINING MARKET SHARE OF U.S. AUTOMAKERS*

We develop a consumer‐level model of vehicle choice to shed light on the erosion of the U.S. automobile manufacturers' market share during the past decade. We examine the influence of vehicle attributes, brand loyalty, product line characteristics, and dealerships. We find that nearly all of the loss in market share for U.S. manufacturers can be explained by changes in basic vehicle attributes, namely: price, size, power, operating cost, transmission type, reliability, and body type. U.S. manufacturers have improved their vehicles' attributes but not as much as Japanese and European manufacturers have improved the attributes of their vehicles.     

Boundaries of the firm: evidence from the banking industry

Agency theory implies that asset ownership and decision authority are complements. Using 1998 data from Texas commercial banks, we test whether the likelihood of local ownership of bank offices increases with the importance of granting local managers greater decision authority (for example, due to location or customer base). Our empirical evidence is consistent with this hypothesis. It suggests that complementarities between strategy and organizational structure can foster differentiation among firms in terms of location, customers, and products. It also supports the growing view that small locally-owned banks have a comparative advantage over large banks within specific environments.     

The Wealth Effects of Repurchases on Bondholders

Prior research has documented positive abnormal stock returns around the announcements of repurchase programs; several explanations of these returns have been suggested, including signaling, free cash flow, and wealth redistributions. This study analyzes abnormal stock, bond, and firm returns around repurchase announcements to examine these hypotheses. We find evidence consistent with both signaling and wealth redistribution. The loss to bondholders is a function of the size of the repurchase, and the risk of the firm's debt. We also find that bond ratings are twice as likely to be downgraded as upgraded after the announcement of the repurchase program.