Financial distress and the business cycle

In this paper we argue that firms' financial distress shouldplay a greater role in the macroeconomic analysis of the businesscycle. We provide a non-technical account of a general equilibriummodel that exhibits financially-driven equilibrium cycles. Weshow that the empirical evidence is widely supportive of thekey hypothesis and implications of our approach. We use themodel in order to evaluate the effects of several policy measures.It turns out that deepening the market for second-hand capitalgoods, subsidizing the interest payments of companies whichstart up when financial conditions are tight, and bailing outsome companies in default can indeed 'stabilize' the economy.By way of generalization, we may say that the policy reactionto a financially driven bust should be accommodating.     

Disclosure, leaks, and slips: Issues and strategies for prohibiting employee communication

Both popular and social science literature are replete with recommendations for enhancing communication effectiveness, typically defined as improving the clarity and impact of the spoken and written word. However, managing internal organizational processes and external market competitiveness often requires a different communication strategy, specifically silence and non-disclosure, while adhering to statutory regulations. This article summarizes the rationale for communication prohibitions, highlights counter forces mitigating their intended effects, and offers recommendations for successful implementation. The three major counter forces are: employee motivation and perception, changing socio-cultural norms, and organizational structures reflecting virtual teams and project teams. The eight recommendations for combating these forces are subsumed under one of two categories: creating an organizational culture supporting prohibitions, and executing the prohibitions with a minimum of employee resistance. In summary, employees charged with maintaining secrecy and adhering to non-disclosure prohibitions must view those restrictions as reasonable, warranted, equitable, and legal.     

Explaining the variance of price-dividend ratios

I report a bound on the variance of the-dividend ratios anda decomposition of their variance into terms that reflect changesin dividend growth and discount rates. The specification isnot restrictive. The test statistics do not require constructionof ex post present values; instead, they are restrictions onmeans, variances and covariances of price-dividend ratios, dividendgrowth, and discount rates. I consider implications for themean price-dividend ratio, and I evaluate whether a low meandiscount rate can rationalize the mean and variance of price-dividendratios. The results do not indicate any striking rejectionsof present value models. However, the bulk of the variance ofprice-dividend ratios must be accounted for by changing forecastsof discount rates, and discount rates must possess some unusualcharacteristics.     

Organizational Politics:Tactics, Channels, andHierarchical Roles

This research examines the relationships among the types of self-serving political messages sent in organizations, the channels through which they are sent, and the targets to whom they are sent. Two theoretical streams converge in this study: Communication as Political Behavior and Media Usage Theory. A review and synthesis of these two bodies of literature yielded three hypotheses, each of which received strong statistical support. The data suggest that the process of encoding and transmitting self-serving messages is strongly related to the specific target to whom they are sent (boss, subordinate, or peer) and the channel through which they are sent (face-to-face, telephone, memo, or e-mail).     

Price formation on stock exchanges: the evolution of trading within the day

Prior analyses of prices of the NYSE and other exchanges findthat transitory price volatility is greater at the open of tradingthan at the close. We extend this line of research by using40 years of hourly Dow Jones 65 composite price index data toestimate transitory volatility throughout the trading day. Ourresults indicate that transitory volatility steadily declinesduring the trading day. We find a similar intraday decline intransitory volatility for a 2-year sample of the individualfirms in the Dow Jones 30 Industrials Index. The results areconsistent with the hypothesis that trading aids price formationand do not support the argument that particular trading mechanismsare the source of greater volatility at the open of trading.