UNIT MANAGEMENT BUYOUTS, STOCKHOLDER WEALTH, AND SELLING FIRMS' CHARACTERISTICS

Previous research on unit management buyouts, UMBs, has shown that selling firms benefit from the selloff transaction. The current research demonstrates that when the selling firm has either poor liquidity or poor earnings, selling firm shareholders do not benefit as much. We hypothesize that the unit managers have knowledge about the selling firm's difficulties so they do not pay as large a premium for the assets. Since the unit managers technically are employed by the selling firm shareholders, their bargaining to achieve a better price is an agency cost. Finally, selloff frequency does not affect seller abnormal returns.     

Consumer safety in Greece: An analysis of the Consumer Protection Act 1991

In September 1991 the Greek Consumer Protection Act No. 1961 was enacted. Chapter 2 of this Act establishes a legal framework for product safety. This framework has the dual aim of securing deregulation in the Greek market while maintaining effective consumer protection. This paper analyses the main features of this framework and demonstrates its inadequacies. It also investigates the extent to which these inadequacies could jeopardise an effective protection of consumers' interests. The paper concludes by emphasising that effective protection of consumers can only be achieved by supporting the general safety requirement with adequate accident-surveillance systems, mechanisms for investigation of risks, unambiguous risk-assessment criteria, creation of a comprehensive set of supporting standards that offer a high level of protection, effective control of the safety of products by the authorities, and real possibilities for consumer organisations to participate in the whole process.

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Zusammenfassung Die Sicherheit des Verbrauchers in Griechenland: eine Analyse des Verbraucherschutzgesetzes von 1991 Im September 1991 trat das griechische Verbraucherschutzgesetz in Kraft. Kapitel 2 des Gesetzes führt einen rechtlichen Rahmen für die Sicherheit von Produkten ein. Dieser Rahmen verfolgt das Ziel der Deregulierung auf dem griechischen Markt bei zugleich wirksamem Verbraucherschutz. Der Beitrag analysiert die wesentlichen Aspekte dieses Rahmens und stellt seine Schwächen dar. Er prüft, inwieweit diese Schwächen einem wirksamen Verbraucherschutz entgegenstehen können, und hebt hervor, da\ wirksamer Verbraucherschutz nur durch Stärkung der allgemeinen Sicherheitsbestimmungen erreicht werden kann. Dafür sind erforderlich ein angemessenes Unfallüberwachungssystem, Regelungen für die Untersuchung von Risiken, eindeutige Kriterien für die Bewertung von Risiken, die Entwicklung umfassender Kriterien zur Gewährleistung eines hohen Schutzniveaus, die wirksame Kontrolle der Produktsicherheit durch die Behörden, sowie für die Verbraucherorganisationen die faktische Mitwirkungsmöglichkeit an der gesamten Entwicklung.

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George Argiros, a member of the Athens Bar Association, is at present researching in the field of EC Law and Consumer Protection at the University of Leicester, Faculty of Law, Leicester LE1 7RH, U.K.     

Rates of Return to Schooling in China

This study uses data from a 1988 survey of Chinese individuals to estimate rates of return to schooling in China. The Mincer-type rate of return to schooling was estimated at 4.02 percent in the rural areas and 3.29 percent in the urban areas; these are fairly low estimates compared with similar estimates in other countries. The rate of return to schooling for females was significantly higher than that for males in urban areas. In addition, members of the Communist Party in urban areas had significantly lower returns to schooling compared with non-members.     

LESSONS FROM A MIDDLE MARKET LBO: THE CASE OF O.M. SCOTT

In 1986 The O.M. Scott & Sons Company, the largest producer of lawn care products in the U.S., was sold by the ITT Corporation in a divisional leveraged buyout. The company was founded in Marysville, Ohio in 1870 by Orlando McLean Scott to sell farm crop seed. In 1900, the company began to sell weedfree lawn seed through the mail. In the 1920s, the company introduced the first home lawn fertilizer, the first lawn spreader, and the first patented bluegrass seed. Today, Scott is the acknowledged leader in the “do-it-yourself” lawn care market, with sales of over $300 million and over 1500 employees. Scott remained closely held until 1971, when it was purchased by ITT. The company then became a part of the consumer products division of the huge conglomerate, and operated as a wholly-owned subsidiary for 14 years. In 1984, prompted by a decline in financial performance and rumors of takeover and liquidation, ITT began a series of divestitures. Over the next two years, total divestitures exceeded $2 billion and, after years of substandard performance, ITT's stock price significantly outperformed the market. On November 26, 1986, in the midst of this divestiture activity, ITT announced that the managers of Scott, along with Clayton & Dubilier (C & D), a private firm specializing in leveraged buyouts, had agreed to purchase the stock of Scott and another ITT subsidiary, the W. Atlee Burpee Company. The deal closed on December 30. Clayton & Dubilier raised roughly $211 million to finance the purchase of the two companies. Of that $211 million, almost $191 milion, or 91% of the total, was debt: bank loans, subordinated notes, and subordinated debentures. The $20 million of new equity was distributed as follows: roughly 62% of the shares were held by a C & D partnership, 21% by Scott's new subordinated debtholders, and 17.5% by Scott management and employees. After this radical change in financial structure and concentration of equity ownership, Scott's operating performance improved dramatically. Between the end of December 1986 and the end of September 1988, sales were up 25% and earnings before interest and taxes (EBIT) increased by 56%. As shown in Table 1, this increase in operating earnings was not achieved by cutting back on marketing and distribution or R & D. In fact, spending on marketing and distribution increased by 21% and R & D spending went up by 7%. Capital spending also increased by 23%.     

Productivity growth in Indian agriculture: is there evidence of convergence across states?

This paper explores the question of convergence in total factor productivity (TFP) in agriculture across fourteen major agricultural states of India. Using a Törnqvist–Theil index for TFP growth for the period 1973–1993, we find no evidence to support convergence to a single TFP level (σ‐convergence). After grouping the various states on the basis of their productivity performance, we find that the high‐performing states show a gradual movement towards the trend, whereas the low‐performing states generally show more volatility. Testing for long‐run convergence in levels of agricultural productivity, we find evidence of conditional beta‐convergence after controlling for state‐specific factors and idiosyncratic year‐specific volatility. The results are robust to alternative specifications of tests of unit root in panel data developed recently.     

Theological ethics and business ethics

Philosophers have constituted business ethics as a field by providing a systematic overview that interrelates its problems and concepts and that supplies the basis for building on attained results. Is there a properly theological task in business ethics? The religious/theological literature on business ethics falls into four classes: (1) the application of religious morality to business practices; (2) the use of encyclical teachings about capitalism; (3) the interpretation of business relations in agapa-istic terms; and (4) the critique of business from a liberation theological point of view. Theologians have not adequately addressed the questions of whether there are particular theological tasks in the field as they define it, and whether, if they define it, the theological definition is different from the philosophical.     

Contract modifications and the basis behavior of live cattle futures

The purpose of this study was to assess the basis behavior of the Live Cattle Futures contract at the Chicago Mercantile Exchange (CME) before and after the 1995 contract changes. Additionally, an alternative method of basis calculation utilizing weighted mean futures prices versus settlement futures prices was compared to determine which method provides a better representation of the basis level. Within a regression model with heteroskedascity error framework, we found that the level of nearby basis in the period after June 1995 has shifted lower and the average monthly open interest of net commercial long positions has substantially increased after the contract modifications. These empirical results are consistent with the notion that more long activity entered the market in response to the contract modifications. Additionally, an alternative (new) measure of basis calculation (cash price minus weighted mean futures price) produced similar results to two other commonly used measures. In conclusion, the 1995 contract changes have neither increased nor decreased the volatility of live cattle basis. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:557–590, 2004     

CATALOG RETAILER IN‐STOCK PERFORMANCE: AN ASSESSMENT OF CUSTOMER SERVICE LEVELS

The purpose of this article is to study the level of “in‐stock” customer service performance being offered in the catalog channel of distribution. The article provides benchmark information for the catalog industry. More importantly, the article serves as one test of the effectiveness of the modern supply chain, where the expectation is for near perfect orders. Customer service levels are studied by using an empirical observation methodology in which catalog retailer's in‐stock performance was measured. Comparisons are made across item type, season, retailer type, and days from catalog receipt. Overall, items were out‐of‐stock during 15.9% of all checkpoints, compared to an 11.8% stock‐out rate in an earlier study of bricks and mortar retailers.