The Impact on UK Acquirers of Domestic, Cross‐border, Public and Private Acquisitions

Abstract:   We examine the announcement and post‐acquisition share returns of UK acquirers in over 4,000 acquisitions of domestic, cross‐border, public and private targets. Domestic public acquisitions result in negative announcement and post‐acquisition returns, whilst cross‐border public acquisitions result in zero announcement returns and negative post‐acquisition returns. In contrast, both domestic and cross‐border private acquisitions result in positive announcement returns and zero post‐acquisition returns. The main differences between private and public acquisitions are that glamour acquirers underperform in public acquisitions but not in private acquisitions, and that acquirers using noncash methods of payment underperform in domestic public acquisitions but not in domestic private acquisitions. Overall, cross‐border acquisitions result in lower announcement and long run returns than domestic acquisitions. In cross‐border acquisitions, those involving high‐tech firms perform relatively well, as do those with low national cultural differences.     

The Long Run Abnormal Performance of UK Acquirers and the Free Cash Flow Hypothesis

Abstract:   Evidence from recent US and UK studies reveals a pattern of poor long run post acquisition performance by acquiring firms. One explanation, due to Jensen (1986) is that acquirers with an excess of free cash flow (FCF) will have a propensity to squander this on wasteful investments, including take‐overs. In this paper, using a dataset of UK take‐overs and proxies for free cash flow similar to those used by Lang, Stulz and Walking (1991) , we find no support for the FCF hypothesis and show that this conclusion is robust to the model of long run returns employed. Contrary to the free cash flow hypothesis there is evidence that acquirers with high free cash flow perform better than acquirers with low free cash flow. Although not consistent with the Jensen hypothesis, this evidence is compatible with the emerging UK evidence that shows cash flow‐to‐price measures are associated with market returns.     

An Economic and Policy Analysis of Australian Export Concession Schemes

This paper examines the relationship between the implementation of industry policy instruments known as export concession schemes and the growth in Australian value-added exports.     

Deposit Insurance, Capital Regulations, and Financial Contagion in Multinational Banks

Abstract:  Banking sector globalization has caused an expansion in foreign-owned bank assets. In this paper we analyse the effects of a MNB's liability structure upon its investment in a foreign country. We develop a model in which capital adequacy requirements introduce some deliberate underinvestment which counters deposit insurance-induced overinvestment. Diversification is unattractive with fixed bank capital requirements, because it reduces the expected value of the deposit insurance net. This effect applies in multinational banks (MNBs), where shocks to the home country economy alter the value of the deposit insurance net and hence affect overseas lending incentives. Thus, MNBs act as a channel for financial contagion. We discuss the policy implications of our results.     

Alternative Input-Output Matrix Updating Formulations

There has been a recent resurgence of interest in biproportional adjustment methods for updating and interpreting change in matrix representations of regional structures, most commonly input-output accounts. Although the biproportional method, commonly called the RAS technique in the input-output literature, has been shown to have a number of theoretically appealing properties, various alternatives do exist. In this paper, we develop and empirically assess a number of alternatives, comparing performance and examining the attributes of these adjustment methods. Two of these are sign-preserving updating methods for use when tables contain both positive and negative entries. One of these is shown to generate less information gain than does a generalized RAS method that Junius & Oosterhaven (2003) formulated to deal with matrices with both positive and negative values. Overall, while the RAS method continues to be commonly used and its choice is often rational, alternative methods can perform as well or better along certain dimensions and in certain contexts.     

Spikes and spill-overs: The impact of the national minimum wage on the wage distribution in a low-wage sector

The UK National Minimum Wage (NMW) has had a minimal impact on UK wage inequality because it has been set at a modest level and because aggregate evidence suggests very small spill-over effects. But the small spill-over effects might be because of the small numbers of workers affected and widespread anticipation of the introduction of the NMW might make the impact effect appear very small. This paper investigates these issues using data collected from care homes where the NMW affected 40% of workers. But we still find no evidence of large spill-over effects and very small amounts of anticipation of the NMW.     

US fiscal policy in a (brief?) era of surpluses

This paper has several objectives. First, it reviews the recent improvement in the US fiscal picture and discusses the sources of this trend. It then considers the implications for the future, taking into account the past performance of budget forecasts as well as the changing composition of the federal budget. Next, it provides some estimates of the long-term fiscal imbalance still faced by the US. Finally, it briefly discusses the various policy options available to address this imbalance, and suggests how the budget measurement and forecasting procedures should be changed to accommodate the current budget situation, in which the long-term problems are not adequately conveyed by short-term measures.