The Evidence on Product-Market Diversifying Acquisitions and Joint Ventures by U.S. Banks

We examine the acquisition and joint venture strategies of U.S. banks from 1980 to 1998 to diversify into non-banking sectors. We find that the market responds favorably to both types of expansions, with the gains being shared between acquiring banks and their targets and venture banks and their non-bank partners, respectively. Acquisitions expose acquiring banks to significant increases in nonsystematic, market, and total risk, while joint ventures result in significant decreases in the nonsystematic and total risk measures for participating banks. Our results suggest that product-market expansions, in general, provide U.S. banks with value-enhancing opportunities, and that joint ventures may improve both the return and risk characteristics of the partner banks.     

The effect of latency variables on repeated measures inference applied to the measurement of risk-taking as a function of psychopathy

In numerous psychology studies, subjects are asked to perform some task a number of times, T. The effect of the choice of T on the associated inference, however, is usually not assessed. We investigate the appropriate choice of T empirically by using data collected in a study on the relationship between psychopathy and risk-taking in 90 inner city drug users enrolled in a residential treatment program. We show that, when studying this relationship, the latency variable usually discarded from the analysis behaves exponentially allowing a natural division of the study period 1, . . . , T into two distinct subperiods. These subperiods yield significantly different results—in the early period only (which we call “reactive”), subjects with high psychopathy scores exhibit lower sensitivity to reward and punishment in our risk taking experiment. The later period (which we call “stable”) shows no relationship between sensitivity to reward and punishment and psychopathic tendencies.     

Delivering Public Health Care Services: Substitutes,Complements, or Both?

In this article we investigate how the availability of public health care providers increases (complement) or decreases (substitute) the likelihood of having public or private health insurance. The probability of each of three insurance alternatives (uninsured, Medicaid, private insurance) is modeled as a function of the availability of public programs in the respondents'community along with individual characteristics including family income, health status, and family structure. Using population-based estimates, public hospitals are associated with a crowd-out rate of 3.5 percent to 8.6 percent. Federally qualified health centers were associated with a net complementary effect (additional public insurance take-up) of 7.1 percent. (JEL I11 , I18 , I38 )     

Do Institutional and Individual Investors Differ in Their Preference for Financial Skewness?

Employing a unique sample of individual and institutional investors, we conduct experiments to determine investors’ preference for (or indifference to) financial skewness. We present investors with a series of stocks with varying levels of skewness. Using Instant Response Devices, we then collect investors’ choices to hold or sell each stock. Among stocks with equal expected returns, we find strong evidence that the sample investors use a prospect theory utility function rather than a mean-variance expected utility function to decide to sell or hold stocks. In the loss domain, we find that investors are ambivalent about the choice between positively and negatively skewed stocks. However, in the gain domain, we find that both individual and institutional investors prefer negatively skewed stocks—a contrast from previous research suggesting that individuals (and not institutional investors) prefer positive skewness. We also find evidence suggesting that reference points are important in financial decision making.     

Unraveling the Academic Productivity of Economists: The Opportunity Costs of Teaching and Service

This study investigates the relationships among research productivity, teaching, and service on the basis of individual-specific information involving approximately 715 academic economists. Responding to an online survey, these economists provided information regarding their teaching and service commitments as well as personal and institutional information. The publication record of each respondent was then obtained from EconLit. Together, these data constitute a rich field for the systematic study of research productivity. Results of a Tobit analysis reveal much about the nature of research productivity, underscoring, for instance, the importance of gender, coauthorship, presentations at conferences, and peers who publish. Among the more important findings from this analysis is that both teaching and service commitments have a significantly negative impact on the research productivity of academic economists. These relations hold across types of academic employer, though to varying degrees. Taken together, the results provide interesting insights into the roles of academic scholars, teachers, and colleagues.     

Acquisitions of family owned firms: boon or bust?

Using a hand-collected dataset, we examine the acquisitions of 307 family owned targets for the period 1984–2000 to study the conflicting roles of entrenchment and alignment of interests in these firms. We find that bidders experience the strongest announcement market reaction at the medium levels of family ownership. However, bidder returns are negatively impacted when acquiring a public target family firm, even controlling for the percent owned by the family. We also find that overall firms that acquire family owned targets experience significant large negative returns in the long run. However, the long run results are also sensitive to the ownership structure of the family firm target with medium levels resulting in insignificant returns in the long run.