VALUE-AT-RISK AND CORPORATE VALUATION

Although first used mainly by financial institutions to evaluate their trading risks, Value-at-Risk (VAR) can also be used to enhance an industrial corporation's understanding and management of its market risks. To illustrate this broader application of VAR analysis, the authors present a simple example focusing on the valuation of a closely held company. In this case, VAR is used to analyze the sensitivity of the firm's value to movements in uncertain exchange rates, commodity prices, and interest rates.     

EXTERNAL CAPITAL MARKET CONTROL, CORPORATE RESTRUCTURING, AND FIRM PERFORMANCE DURING THE 1980s

The corporate restructuring activity of the 1980s, sparked by potential external capital market intervention, is believed to have been primarily directed at correcting the diversification mistakes of the 1960s and 1970s, which had led to poor corporate performance. Assuming that investor gains from corporate restructurings are unbiased expectations regarding future efficiency gains, many researchers concluded that the market for corporate control is an efficient external control mechanism and that the restructuring programs of the 1980s will, on average, be followed by substantial improvements in corporate performance. To examine whether those improvements were achieved, this paper analyzes the long-term operating and financial performance of the 50 most aggressive US participants in the takeovers and corporate restructuring activity during the 1980s. The results support the hypothesis that the market for corporate control is an efficient external corporate control mechanism of last resort.     

LABOR LAWS AND FIRM PERFORMANCE

U.S. labor laws impose higher costs on unionized firms in states without right‐to‐work (RTW) laws. I find that these firms experience poor stock performance. The difference‐in‐differences analysis comparing the effect of RTW laws on unionized and nonunionized firms shows that unionized firms in states without RTW laws underperform by about 7 percentage points per year. I find further evidence of underperformance using alternative methods to estimate abnormal stock performance, examining a natural experiment, showing expected cross‐sectional patterns, and assessing profitability and the market reaction to earnings announcements.