NOVELTY EFFECTS OF NEW FACILITIES ON ATTENDANCE AT PROFESSIONAL SPORTING EVENTS

We investigate the effect of new facilities on attendance in professional baseball, basketball, and football from 1969 to 2001. We find a strong, persistent effect in baseball and basketball, and little effect in football. Size and duration estimates imply that baseball teams sell 2,500,794 additional tickets over the first eight seasons, basketball teams 293,878 over the first nine seasons, and football teams 137,792 over the first five seasons, implying an increase in revenues that could defray public subsidies that state and local governments provide for new sports construction projects. Rough calculations suggest that stadium subsidies are an inefficient method of subsidizing professional sports franchises. (JEL R39 , D12 , L83 )     

STADIUMS AND ARENAS: ECONOMIC DEVELOPMENT OR ECONOMIC REDISTRIBUTION?

This article explores the literature on the impact of professional sports teams and stadiums on their host communities. A large body of research has addressed these issues, some of it academic and much of it for hire by team and sport boosters. The broad conclusion of this literature is that stadiums and franchises are ineffective means to creating local economic development, whether that is measured as income or job growth. There may be substantial public benefits from stadiums and franchises, but those too are insufficient to warrant large-scale subsidies by themselves. In combination with consumer surpluses from attendance, however, subsidies may be efficient. ( JEL R58, J30, H71, L83)     

Corporate Bankruptcy and Managers' Self-Serving Behavior

We investigate whether insiders of bankrupt firms hold less stock or reduce their stockholdings compared to what we observed for insiders of similar firms that do not go bankrupt. We find little evidence of such time-series and cross-sectional differences in spite of the fact that the stock value of bankrupt firms falls by more than ninety percent in the five years preceding bankruptcy. One implication of our results is that the amount of stock owned and the magnitude of the trades undertaken by corporate insiders of both bankrupt and nonbankrupt firms appear to provide no information about firm value.     

Global Banks and Synthetic Funding: The Benefits of Foreign Relatives

This paper examines the effect of dislocations in foreign currency (FX) swap markets (“CIP deviations”) on bank lending. Using data from UK banks we show that when the cost of obtaining swap-based funds in a particular foreign currency increases, banks reduce the supply of cross-border credit in that currency. This effect is increasing in the degree of banks' reliance on swap-based FX funding. Access to foreign relatives matters as banks employ internal capital markets to shield their cross-border FX lending supply from the described channel. Partial substitution occurs from banks outside the UK not affected by changes in synthetic funding costs.     

Nonfinancial Performance Measures and Promotion-Based Incentives

In this paper, I examine the sensitivity of promotion and demotion decisions for lower‐level managers to financial and nonfinancial measures of their performance and investigate the extent to which the behavior of lower‐level managers reflects promotion‐based incentives. Additionally, I test for learning versus effort‐allocation effects of promotion‐based incentives. I find that promotion and demotion decisions for store managers of a major U.S.‐based fast‐food retailer (QSR) are sensitive to nonfinancial performance measures of service quality and employee retention after controlling for financial performance. The likelihood of demotion in this organization is also sensitive to nonfinancial performance on the dimension of service quality, while the probability of exit is primarily sensitive to financial performance measures rather than nonfinancial performance measures. I also find evidence that the behavior of lower‐level managers is consistent with the incentives created by the weighting of nonfinancial performance measures in promotion decisions. Managers in locations where there is a higher ex ante probability of promotion and a higher potential reward upon promotion demonstrate significantly higher levels and rates of performance improvement in service quality. Finally, consistent with promotion‐based incentives inducing both effort‐allocation and learning effects, I find that performance‐improvement rates for service quality: (1) are higher in prepromotion periods in markets where promotions occur, (2) decrease immediately after the occurrence of a promotion in the same market area, and (3) remain higher than in markets where promotions do not occur. These findings provide some of the first empirical evidence on an alternative to the explicit weighting of nonfinancial metrics in compensation contracts as a mechanism for generating improvements in nonfinancial dimensions of performance.     

Generalized Stability of Monetary Unions Under Regime Switching in Monetary and Fiscal Policies

Earlier studies on the stability of monetary unions show that an inflation‐targeting central bank imposes strict budgetary requirements on fiscal policy to obtain a unique stable equilibrium. Failure of only one fiscal authority to meet these requirements already results in nonexistence of equilibrium. Nevertheless, it might prove useful to temporarily depart from such requirements in order to absorb country‐specific shocks. We show that such departures are feasible if fiscal authorities commit to switch to more sustainable fiscal regimes in the future. Debt devaluation and fiscal bailouts may also broaden the range of policy stances under which monetary unions are stable.