Partial anticipation, the flow of information and the economic impact of corporate debt sales

Corporate debt sales have been regarded as 'no news' eventsbecause there is no significant price reaction on average totheir announcement. We explore the hypothesis that this lackof average price reaction to debt sale announcements is explainedby the partial anticipation of debt offers. Theory suggeststhat the demand for debt capital is fundamentally related tochanges in the sources and uses of funds, and we find evidencethat earnings are significantly lower, investment growth issignificantly bigger, and, for some issuers, debt refundingrequirements are significantly greater in the period immediatelyprior to issue than in periods well before and after the issue.We find that this preissue information conditions investors'expectations of issue, thereby affecting the cross-sectionalannouncement date price reaction to debt sales in two ways.First, announcement date price reactions are negative, on average,for unanticipated offers or for those offers where prior informationsuggests that an issue is unlikely. Second, holding the probabilityof issue constant, announcement date price reactions are significantlymore negative for offers that raise more capital than investorsexpected. These results are consistent with cash flow signalingand asymmetric information models of corporate financings.     

Micro-economic applications of marginal changes in risk

Extending a recent definition, we propose a theorem on the impact of marginal changes in risk on the optimal decision of a risk averse individual. Several micro-economic applications are then provided.     

An analysis of inter-unit control in channel systems

Control within a channel can be effected by either wholly- or quasi-integrating the system. The degree of control exercised can range from a maximum to a minimum level, with each extreme along the continuum offering a unique set of relative advantages. It is contended that the level of control practiced should be determined by an examination of the environmental factors that prevail in a given situation. For the most part, wholly-integrated systems have emerged to satisfy those environments which call for maximum control. However, there appear to be numerous opportunities for more aggressive application of quasi-integration. The overall success of a channel, in terms of profit and/or stability it can return to its members, may very well depend on a process of (integrated) coordinated action. (Stern, 1965)     

Networked incubators. Hothouses of the new economy

Business incubators such as Hotbank, CMGI, and Idealab! are a booming industry. Offering office space, funding, and basic services to start-ups, these organizations have become the hottest way to nurture and grow fledgling businesses. But are incubators a fleeting phenomenon born of an overheated stock market, or are they an important and lasting way of creating value and wealth in the new economy? The authors argue that one type of incubator, called a networked incubator, represents a fundamentally new and enduring organizational model uniquely suited to growing businesses in the Internet economy. It shares certain features with other incubators--mainly, it fosters a spirit of entrepreneurship and offers economies of scale. But its key distinguishing feature is its ability to give start-ups preferential access to a network of potential partners. Such incubators institutionalize their networking--they have systems in place to encourage networking, helping start-ups, for example, to meet with potential business allies. That doesn't mean incubatees get preferential treatment; it means only that they have built-in access to partnerships that might not have existed without the incubator. Even with this advantage, however, networked incubators can easily follow the road to ruin. To avoid failure, they must create a portfolio of companies and advisers that their incubatees can leverage. That can be done by strategically investing in portfolio firms and by enlisting a large set of business allies. It can also be done by establishing connections and relationships that are anchored more to the incubator than to particular individuals.     

Equilibrium business cycles with idle resources and variable capacity utilization

Summary A real business cycle economy is studied in which some capital is idle each period and the fraction of capital left idle varies in response to technology shocks. Previous equilibrium business cycle models have the characteristic that the entire stock of capital is used for production in each period. Our objective is to determine whether incorporating idle resources, something regularly observed in actual economies, significantly affects the cyclical properties of the model and hence changes our views about the importance of technology shocks for aggregate fluctuations. In our analysis we do not assume an aggregate production function, but instead model production as taking place at individual plants that are subject to idiosyncratic technology shocks. Each period the plant manager must choose whether to operate the plant or to let the plant remain idle. We find that the cyclical properties of this model are surprisingly similar to those of a standard real business cycle economy. One difference is that the model displays variation in factor shares while the standard models does not.The authors acknowledge support from the National Science Foundation.     

A Damage Based Tax Mechanism for Regulation of Non-Point Emissions

In a recent paper Segerson (1988) proposed a novel incentive mechanism for stochastic non-point emissions based on ambient pollution concentrations in nature. For specification of the mechanism when the damage function is nonlinear, the regulator must know polluters cost and emission functions. The mechanism also gives incentives to form coalitions among polluters, which, if they are formed, render the mechanism inefficient. In this paper we propose a revised mechanism which eliminates the need for knowledge of polluters cost and emission functions and reduces the probability of coalition forming. A standards and pricing version of the revised mechanism with both properties mentioned is also developed.     

Shiftable Externalities: A Market Solution

In this paper we propose a regulatory scheme for what has become known as shiftable externalities (Not In My Backyard type garbage location problemswhere the externality is characterized by the absence of jointness in supply).The scheme facilitates the establishment of a market for the externality, and it isfeasible for a wider class of regulation problems and more information efficientthan the other regulatory schemes that have been proposed for this type ofexternality. Finally, we show that it is possible to decentralize the participationdecision so as to take account of verification costs.     

Honourable dwellings: almshouses as estate-consistent charity in Copenhagen,c. 1700–1850

The main focus of this article is the connection between the social hierarchies and charities like almshouses in Danish urban society between 1700 and 1850. The almshouses and a whole range of other charities were exclusively targeted at those of the upper and middle classes who had fallen on hard times and could not be supported by their families. They were offered better material conditions than the poor of the lower classes. Thus, this kind of charity was both based on, and reinforced, a division of society in distinct social layers. At the same time, the exclusion of the lower-class poor shows that almshouses played an important role in shoring up social boundaries as well as social markers.     

Can Non-point Phosphorus Emissions from Agriculture be Regulated Efficiently Using Input-Output Taxes?

In many parts of Europe and North America, phosphorus loss from cultivated fields is threatening natural ecosystems. Though there are similarities to other non-point agricultural emissions like nitrogen that have been studied extensively, phosphorus is often characterized by the presence of large stocking capacities for phosphorus in farm soils and long time-lags between applications and emission. This makes it important to understand the dynamics of the phosphorus emission problem when designing regulatory systems. Using a model that reflects these dynamics, we evaluate alternative regulatory systems. Depending on the proportions of different types of farms in the agricultural sector, we find that an input-output tax system can be the core element of a close to efficient regulatory policy.