The Mode of Acquisition in Takeovers: Taxes and Asymmetric Information

We develop a model in which the mode of acquisition conveys information concerning the value of the bidder. The model incorporates the possibility that offers containing both cash and stock can be made in a setting consistent with the U.S. tax code. We demonstrate that bidders with unfavorable private information about their equity value choose offers containing some stock to avoid the capital gains tax consequences of cash offers. The model yields a number of unique predictions about the construction of acquisition offers. We present evidence consistent with the model.     

Vested Interest and Biased Price Estimates: Evidence from an Auction Market

This study employs a new data set from art auctions to examine the relationship between auctioneer presale price estimates and the long‐term performance of artworks. We find that the price estimates for expensive paintings have a consistent upward bias over a long period of 30 years. High estimates at the time of purchase are associated with adverse subsequent abnormal returns. Moreover, the estimation error for individual paintings tends to persist over time. These results are consistent with the view that auction house price estimates are affected by agency problems and that some investors are credulous.     

Markov-Chain Analysis of Internal Manpower Supply

The separation of manpower forecasting into a demand forecast and a supply forecast emphasizes that each depends on quite different sources of information. The demand forecast is based primarily on an estimate of sales, which is then transformed into the number and type of personnel needed to produce and sell the company's products. The information for forecasting internal supply can often be treated as if it were independent of the external environment and is often available within the firm. If a matrix representing the probability of transition from one job classification to another can be prepared for the relevant classifications, Markov-chain theory can be used to generate a forecast of internal manpower supply.     

The Budget Deficit, Public Debt, and Endogenous Growth

This paper analyzes the effects of public debt on endogenous growth in an overlapping generations model. The government fixes the budget deficit ratio. If the deficit ratio stays below a critical level, then there are two steady states where capital, output, and public debt grow at the same constant rate. An increase in the deficit ratio reduces the growth rate. If the deficit ratio exceeds the critical level, then there is no steady state. Capital growth declines continuously, and capital is driven down to zero in finite time.