Impact of Acquisitions on Thrift Performance

This study focuses on the risk and return performance of savings and loans that were active acquirers during the early and mid-eighties relative to that of non-acquirers. Acquirers took on more risks than nonacquirers, but were less profitable. Separating acquirers by the health of their acquisitions, acquirers of both healthy and troubled associations or of troubled associations only were more highly leveraged and saw their profitability erode over the post-acquisition period. These results suggest that the problems of integration are compounded when there are multiple acquisitions over a relatively short period of time and when the acquired association is unhealthy.     

A Re–examination of the Effectiveness of the Bankruptcy Process

As an increasing number of companies go bankrupt, society grows concerned with the process's efficacy. In contrast to previous research, we find that relatively healthy companies emerge from bankruptcy as evidenced by their operating and equity performance post bankruptcy. While we find a substantial degree of variation in the forecast accuracy of sales, EBIT and net income, we find that forecast errors are not statistically significant and are smaller than had been thought. We provide evidence to support the argument that the economy's health affects operating and equity outcomes post bankruptcy.     

European Union Enlargement Announcement and Corporate Valuations

This study explores the effects of the European Union accession announcement on the valuations of companies in the prospective member states. I examine firm level data from ten countries which joined the EU in May 2004. My analysis reveals that the announcement of these countries’ future EU membership in November 2001 significantly increased the Tobin’s Q ratios of their publicly traded firms several years before formal membership was granted. This increase in firm value can likely be attributed to a reduced cost of capital and/or an expected increase in growth opportunities and cash flows, resulting from the announcement of their countries’ inclusion in the EU.     

L‐moments skewness and kurtosis as measures of regional convergence and cohesion

The paper deals with the statistical modeling of convergence and cohesion over time with the use of kurtosis, skewness and L‐moments. Changes in the shape of the distribution related to the spatial allocation of socio‐economic phenomena are considered as an evidence of global shift, divergence or convergence. Cross‐sectional time‐series statistical modeling of variables of interest is to overpass the minors of econometric theoretical models of convergence and cohesion determinants. L‐moments perform much more stable and interpretable than classical measures. Empirical evidence of panel data proves that one pure pattern (global shift, polarization or cohesion) rarely exists and joint analysis is required.     

Queue-rationed equilibria with fixed costs of waiting

The welfare impact of price controls is examined here in an exchange economy where agents may need to queue in order to make a transaction. Time spent in the queue is an endogenously-determined transaction cost, which agents take as given and which adjusts so as to clear markets when prices are prevented from performing this function. When queuing is required, it enters the household’s decision as a fixed cost, rather than increasing in proportion to the amount of good exchanged, as is far more common in the previous literature. Existence of competitive equilibrium is established for this general equilibrium model. Price controls are shown to cause notable inefficiencies, which differ from those of a proportional cost model. Moreover, in certain environments, price controls will unambiguously harm all individuals relative to a Walrasian equilibrium. The author thanks Beth Allen, Chris Phelan, and Jan Werner for their valuable guidance on this work, as well as Michael Magill, Martine Quinzii, Val Lambson, Nuray Akin, participants of the 2005 Midwest Economic Theory Conference, and members of the Mathematical Economics Workshop at the University of Minnesota. This work also benefited from the thoughtful comments of an anonymous referee. Partial funding came from NSF grants DMI-0070257 and DMI-0217974.     

The Euro Changeover and the Factors Influencing Perceived Inflation

The most flamboyant economic effect of the euro changeover on consumers was a dramatic increase in perceived inflation. To directly measure perceived inflation, Brachinger developed a new index of perceived inflation (IPI). This index is based on some hypotheses about factors influencing perceived inflation. An experimental study is presented which investigated the influence of two of these hypothesized factors, purchase frequency and loss aversion, on individual judgments of price changes. Furthermore, two additional factors have been included that are informative with respect to the IPI, product segment and price level. Judgments of inflation were assessed with three methods, yielding different results. Empirical evidence for the hypotheses was obtained.      

Sustainable growth rate of firms in financial distress

Sustainable growth rate defines the rate at which a company’s sales and assets can grow if the company sells no new equity and wishes to maintain its capital structure. The traditional formula assumes that the firm can increase its indebtedness. Many private firms and most firms in financial distress have limited or no access to debt markets. While distressed firms may prefer a no growth strategy, external pressures such as inflation or demand increases may cause their sales to rise exogenously. A new sustainable growth rate formula is developed that describes how much growth the firm with no new debt capacity can endure.     

Deterring Rearrests for Drinking and Driving

This study assesses why some individuals are rearrested for driving while intoxicated (DWI). Using longitudinal data from North Carolina containing information on arrests and arrest outcomes, we test hypotheses that individuals prosecuted and convicted of DWI are less likely to be rearrested for DWI. We allow for possible endogeneity of prosecution and conviction outcomes by using instrumental variables for the prosecutor's prosecution rate and the judge's conviction rate. With a three‐year follow‐up, the probability of DWI rearrest was reduced by 6.6% if the person was prosecuted for DWI and, for those prosecuted, by 24.5% if convicted on this charge. Prosecution and conviction for DWI deters rearrest for DWI.     

Capturing Regional Trade Effects in the Presence of Other Trade Effects: The Impact of the Europe Agreement on Poland’s Imports

This paper investigates the impact of the Europe Agreement on Poland’s imports using econometric models applied to highly disaggregated trade data. This allows other influences on Poland’s trade patterns to be controlled for, specifically the effects of other trade agreements and for the emergence of China. The paper shows that the Europe Agreement had transitory effects on Poland’s imports, but that the scale of the trade effects and the balance of trade creation and diversion effects is sensitive to model specification. The preferred dynamic specification which allows for heterogeneity of time effects across sectors identifies the Europe Agreement to have net trade-creating effects.