Private communication among competitors and public disclosure

I study how private communication among competitors affects their public disclosures. Theory suggests that competing firms can use public disclosure to coordinate, and predicts less public disclosure when there is more private communication. Using data on strategic alliances, I predict and find that firms that enter strategic alliances with competitors reduce their public disclosure, and that the reduction is more pronounced for alliances that allow for more private communication.     

The public sector and health care

This paper specifies a model of the determinans of total expenditure on health care. The model shows how this expenditure is divided between the public and private sectors when public expenditures are chosen by majority rule.From the theoretical model I derive two equations determining the private and public expenditures on health care as shares of GDP. The equations are estimated using OECD panel data with two-way fixed effects and with simultaneous correction for heteroeskedasticity and serial correlation. The results include estimates of the price and income elasticities of public and private demands for health care as well as estimates of the crowdingout effects of public on private expenditures.Paper presented at the 51st Congress of the International Institute of Public Finance.     

Technological innovation and initial public offerings

This article shows how both technological and competitive risksaffect the timing of private and initial public offerings inan emerging industry. Early private financing occurs in industriesthat are perceived to be risky, with high development costsand low probability of being displaced by technologically superiorrivals. Early public financing occurs in industries perceivedto be viable, with low development costs and low probabilityof displacement. Due to feedback effects between financial andproduct markets, the value of investors' proprietary informationis greater in private than in initial public offerings. Thishas implications for underpricing.     

Debt financing in private and public firms

Using administrative confidential data on the universe of Canadian corporate firms, we compare debt financing choices of private and public firms. Private firms have higher leverage ratios, which are entirely driven by private firms’ stronger reliance on short-term debt. Further, private firms rely more of leverage during economic expansions, while public firms rely on equity financing. Specifically, private firms manage to increase their long-term debt during expansions, while short-term debt is used during downturns. Our findings have implications for a better understanding of the role of asymmetric information in private firms’ capital structure decisions.     

Stock price reaction to public and private information

I use Easley and O’Hara's [1992, Journal of Finance 47, 577–604] private information-based trading variable, PIN, together with a comprehensive public news database to empirically measure the effect of private and public information on the post-announcement drift. I show that stocks associated with high PIN, consensus public news surprises, and low media coverage experience low or insignificant drift. Thus not all information acquisition variables have the same effect on the market's efficiency. Whether information is public or private is irrelevant; what matters is whether information is associated with the arrival rate of informed or uninformed traders.     

Why do private acquirers pay so little compared to public acquirers?

Using the longest event window, we find that public target shareholders receive a 63% (14%) higher premium when the acquirer is a public firm rather than a private equity firm (private operating firm). The premium difference holds with the usual controls for deal and target characteristics, and it is highest (lowest) when acquisitions by private bidders are compared to acquisitions by public companies with low (high) managerial ownership. Further, the premium paid by public bidders (not private bidders) increases with target managerial and institutional ownership.     

The political economy of mixed public and private schooling: A dynamic analysis

This paper analyzes the political economy of education, acquired through a combination of compulsory public schooling and supplementary private education, in the context of an OLG model in which growth is driven by the accumulation of human capital. The level of public schooling, fully funded by a proportional income tax, is determined by majority vote, while supplementary private education is purchased individually. We show existence of a political-economic equilibrium, and examine its characteristics, describing the evolution of the publicprivate mix over time: for moderate parameter values the share of public schooling increases as incomes rise, and inequality falls.     

Liquidity dynamics across public and private markets

In this paper we investigate cross-asset liquidity between equity markets and REITs and between REITs and private real estate markets. While many studies have investigated REIT liquidity, and there is an emerging interest in liquidity in the private real estate markets, there appears to be little knowledge of the dynamics of cross-market liquidity. We find lower levels of liquidity for REITs compared to a set of control firms matched on size and book-to-market ratios. Commonality in liquidity is also lower for REITs than the controls and the overall market. However, we do find an important difference in share turnover for REITs, which appears to have a higher level of commonality than found in other studies. We suggest that this may be due to the financial crisis. Additionally we find evidence of similar time-series variation in liquidity for public and private real estate markets. We also find significant directional causality for most liquidity proxies from the public to private real estate markets. Finally our results show that there is strong contemporaneous correlation between both public and private real estate market liquidity and the term spread and real investment and consumption spending. REIT liquidity measures based on intraday data also appear to contain important information not found in measures constructed from daily returns.     

Laffer effect, gross substitution, marginal cost of public funds and the level property of public good provision

This paper examines the Laffer effect in the Ramsey tax-model with linear consumption taxes and a representative consumer. It is assumed that the private goods and the public good are weakly separable. It is demonstrated that if all of the private goods are weak gross complements to each other, then the Laffer effect does not exist, in other words, higher tax rates can always achieve more tax revenue. In contrast, if all of the private goods are strict gross substitutes, then the Laffer effect does exist. Moreover, if all of the private goods are weak gross substitutes, then the government cannot fully acquire the leisure endowment through taxes on consumption goods. We also show that gross substitution works to raise the marginal cost of public funds.     

Accountability and corporate governance of public private partnerships

Brennan and Solomon (2008) identify six new frontiers in accountability and corporate governance research to stimulate research. This paper contributes to such research by devising a reporting framework and research agenda that relates to Brennan and Solomon's fourth frontier, sectors and context, focusing on the regulated hybrid organisational forms of Public Private Partnerships, which operate at the interface of the public and private sectors.As the framework shows, these organisations are subject to multiple influences and demands. There is a need for more and different reporting than is the norm under the private sector's decision-useful reporting framework. Although the framework focuses on what Mulgan (2000) describes as the core of accountability, it is not only a financial reporting framework but it also seeks to make concrete Kamuf's (2007) argument that accountability might include accounting through narrative as well as the prevailing numeric evaluation.The paper stresses the need for information to be accessible to the public, and in particular argues that a stream of information between the public and private sector partners needs to be developed and disseminated to achieve accountability for public money that is increasingly spent in the private sector.     

Private and public disclosures and the efficiency of stock prices

In this paper I examine the effects of private and public disclosures on the informational efficiency of stock prices. In addition to making a public announcement such as an earnings announcement, a public firm can make private disclosure to an analyst. If the analyst's relative information advantage is below a threshold level, private disclosure to the analyst leads to more efficient stock price. I demonstrate that the allocation of information across market participants is an important determinant of price efficiency. While accounting regulators often argue the need for equal access to information, the paper shows that there are conditions under which a limited amount of informational inequality may lead to more efficient stock prices.     

Dynamic labor demand in China: public and private objectives

This article studies dynamic labor demand by private and public manufacturing plants in China. The analysis uncovers the objectives of public and private enterprises and estimates labor adjustment costs by ownership. Public plants maximize the discounted present value of profits without a soft budget constraint. There is strong evidence of quadratic and linear firing costs at the plant level. The higher quadratic adjustment costs of the public plants may reflect their internalization of social costs of employment adjustment. Domestic private plants and collective plants have about the same discount factor, much lower than state‐controlled plants.     

Innovation, public choice and public control in the market for health insurance.

Innovation, public choice and public control in the market for health insurance/benefits in the United States are largely dependent upon the ability of the various stakeholders to successfully argue their positions with legislators, regulators, providers, purchasers and third party beneficiaries. Given the public/private nature of health benefits, these relationships are examined in a Stigler/Posner/Peltzman public choice framework. Conflicts among various stakeholders and their ability to influence innovation in the market for health benefits are discussed.     

Moonlighting: public service and private practice

We study job incentives in moonlighting, when public‐service physicians may refer patients to their private practices. Some doctors in the public system are dedicated, and behave sincerely, but others—the moonlighters—are utility maximizers. Allowing moonlighting always enhances aggregate consumer welfare, but equilibrium public‐care quality may increase or decrease; if quality increases, moonlighting improves each consumer's expected utility. Unregulated moonlighting may reduce consumer welfare as a result of adverse behavioral reactions, such as moonlighters shirking more and dedicated doctors abandoning their sincere behavior. Price regulation in the private market limits such adverse behaviors in the public system and improves consumer welfare.     

Political competitiveness and the private–public structure of public expenditure: a model and empirics for the Indian States

Studies of government size usually try to identify the factors that explain what parts of economic activity are brought within the public sector and what parts are left strictly in private hands. Modern governments are now so large that the question of what determines the private/public composition, or privateness, of public expenditure is of comparable importance for understanding the role of government in society. In this paper, we use a model of the composition of public budgets to uncover the importance of electoral competitiveness and other factors in the evolution of the privateness of public expenditure across the Indian states. These states vary widely in their socioeconomic characteristics while sharing a common political heritage based on parliamentary government. New measures of public expenditure on private targetable goods and of electoral competitiveness at the Indian state level accompany the paper along with a primer on Indian public finance accounting practices in an Online Appendix. The empirical analysis shows that the degree of privateness in India’s more developed states falls substantially with greater political competition and with rising incomes, while in the less developed states it responds more weakly to these key factors and in some cases even inversely.

     

Public and private funding in new urban public transport

Pressures to reduce urban traffic pollution in the UK have not yet resulted in new policies to provide attractive alternatives to the private car. With growing pressure on public sector investment funds, this article considers ways in which the private sector could work in partnership with the public sector to create new light rail systems.     

论商法公法化的体现和影响

私法公法化是私法自近代向现代转变过程中出现的一种趋势。商法在本质上具有私法属性,但是商法公法化赋与了商法公法色彩。大量公法性规范注入商法,可是商法的私法性质并未因私法公法化而改变。     

Cost of capital and valuation in the public and private sectors: Tax,risk and debt capacity

Cost of capital and valuation differ in the private and public sectors, because taxes are a cost to the private sector but are only a transfer to the public sector. We show how to transform the after-tax private sector cost of capital into its pre-tax equivalent, for comparison with the public sector cost of capital. We establish the existence of a tax induced wedge between these two costs of capital. The wedge introduces a preference on the part of the private sector for assets with rapid tax depreciation, high debt capacity and low risk. We show that, in circumstances where an asset has identical public and private sector valuation in the absence of taxes, the tax induced difference in valuation is identical to the change in government tax receipts that results from having the asset owned by the private rather than the public sector. We provide some examples of distortions that result from failure to adjust for changes in tax revenues, and show how to effect such adjustment.     

Investor protection and cross-border acquisitions of private and public targets

We examine the announcement-period acquirer returns and target values for a large sample of cross-border acquisitions by U.S. firms, differentiating between private and public targets and paying particular attention to the legal protection of minority shareholders in the target country. For high-protection target countries, acquirer announcement-period returns are significantly negative for public targets and significantly positive for private targets. For low-protection target countries, the acquirer returns are significantly positive for public targets and insignificantly different from zero for private targets. For public targets, acquirer returns are decreasing and target-firm values and acquisition premia are increasing with the level of investor protection. For private targets, investor protection does not affect acquirer returns or target-firm values. We find that bidder returns decrease with the level of creditor protection in the target country and increase with the quality of accounting standards. Our results also show that in low- protection countries, firm-level corporate governance mechanisms, such as higher insider ownership, may substitute for the lower level of investor protection.     

PFIs involving multiple public partners: a case study from the Italian healthcare sector

The financial crisis experienced by many countries since 2008 has given new importance to private finance initiatives (PFIs) for providing public services. This paper analyses the relationships between multiple public and private sector actors participating in a PFI in the healthcare sector in order to better understand the motives and behaviour of public and private sector partners. High levels of trust and the active participation of a regulatory body were found to be significant factors in terms of creating a partnership that benefits all sides.