Taxes and the acquisition of depreciable assets: The Tax Reform Act of 1986 and the alternative minimum tax

Analysis of firm investment behavior during 1982–1993 shows that the Tax Reform Act of 1986 (TRA 86) Public Law No. 99-514 substantially affects both purchases and leases of depreciable assets. The changes in the regular corporate income tax rules are shown to lower asset acquisition. The effect of the alternative minimum tax (AMT) is found to vary with the debt share in firms’ capital structure and with the frequency of AMT exposure during the life of the assets acquired. On average, TRA86 depresses asset purchases less for firms that are subject to the AMT: AMT somewhat mitigates the negative effects of the regular tax rules.     

Evaluation of cooperative research

This report looks at evaluation studies of a number of cooperative academic-industrfy research programmes in Europe, and suggests that indirect economic benefits should be taken into account as well as motives and goals of participating firms.     

From weed to wealth? Prospects for medic pastures in the Mediterranean farming system of north-west Syria

Medic (Medicago spp.) pastures are widely grown in rotation with dryland cereal crops in Mediterranean climate zones of Australia. Attempts since the 1960's to introduce this system to Mediterranean west Asia and north Africa (the native region of medic) have not lead to significant adoption; farmers in the region recognize medic, but as a weed and natural pasture plant. This first detailed economic evaluation of the rotational medic system was conducted using a whole-farm linear programming model based on the agricultural system of north-west Syria. The model represents in detail impacts of rotation on yields, labor requirements of alternative farm activities, availability of family and hired labor, subsistence income requirements, livestock feed sources and uses at different times and a choice of sheep stocking rates. Biological data for the analysis are based on a large six-year cropping and grazing experiment near Aleppo on terra-rossa soil with rainfall mainly in winter and averaging about 330 mm annually. The trial compared a dryland medic-wheat system and traditional two-year rotations of wheat with: fallow, watermelon, lentil and vetch. Results indicate that, given current prices and yields from the trial, medic is less profitable than traditional rotations. The model was used to investigate situations in which medic would be economically preferred. Selection of a medic rotation by the model was found to be particularly sensitive to the area of the farm and the price of labor. On small farms, labor availability per hectare is high, favouring the production of labor intensive crops such as lentil and watermelon. On larger farms, labor costs of these enterprises are substantial, increasing the relative profitability of medic, especially if labor prices increase. Interestingly, the relative desirability of medic is more sensitive to its impact on subsequent wheat crops than to the level of pasture production. We also found that modest increases in the prices of sheep products (especially milk) have a major impact on the economic performance of medic. These insights will allow improved focusing and targeting of future research and extension activities.     

ORGANIZATIONAL CONTEXT AND THE INTERPRETATION OF STRATEGIC ISSUES: A NOTE ON CEOS’ INTERPRETATIONS OF FOREIGN INVESTMENT*

This paper explores the relationship between organizational context and the interpretation of strategic issues by examining the hypothesis that CEOs' interpretations of foreign investment in the USA are influenced by the organizational context in which they are embedded. Three aspects of organizational context - the global business experience of the firm; the firm's level of organizational inertia (as represented by firm age and size); and the resources available for responding - are examined as predictors of CEOs' perceptions of foreign investment as a threat or an opportunity. Analysis of data from 320 organizations, controlled by industry, shows that global business experience, firm size, and perceived capability are significant predictors of the perception of threat and opportunity. the discussion addresses the implications of these findings for future research on issue interpretation and organizational context.     

Corporate investment myopia: a horserace of the theories

This paper tests two theories of corporate investment myopia which predict a distortion in investment policy with respect to the standard net present value rule. The theories are confronted with the empirical evidence, allowing the theories to compete to explain investment behavior. Research and development expense is used to proxy for long-term investment in a pooled, cross-sectional time-series regression. I find that research and development expense is decreasing in the age of the Chief Executive Officer. Results are consistent with the hypothesis that agency costs are lower when the firm invests myopically, rather than follow a standard net present value rule.