Payout policy,financial flexibility,and agency costs of free cash flow

This paper explains how firms choose between dividends and open-market repurchase programs, the prevailing method that firms use to disburse cash today. While earlier theories about payout policy are motivated by signaling, the motivation for payout in this paper is to prevent the waste of free cash by self-interested insiders. In the model, dividends prevent free cash waste by forcing cash out, but result in underinvestment if the cash paid out is later needed for operations. Open-market programs stimulate payout by providing personal gains to informed insiders that are associated with the firm's repurchase trade. Yet, they also avoid the underinvestment problem by leaving insiders the option to cancel the payout. Because their execution is optional, however, open-market programs only partially prevent the waste of free cash. The model provides testable predictions that are generally consistent with the empirical evidence.     

Intentions to Return of Clandestine Migrants: Comment

We take issue with the reasoning of Coniglio et al. ( 2009 ) that whereas better‐skilled illegal migrants will prefer to return‐migrate, lower‐skilled illegal migrants will not. We argue that under asymmetric information, all the illegal migrants are initially paid a wage based on the average productivity of the group of illegal migrants. The better‐skilled illegal migrants thus face two “taxes:” being paid less than if they were legal, and being averaged down. Therefore, better‐skilled illegal migrants can be expected to expend more effort to become legal than lower‐skilled illegal migrants. And once legalized, there is no reason for the better‐skilled illegal migrants to want to return to their country of origin more than the lower‐skilled illegal migrants. Thus, it is the lower‐skilled illegal migrants that are likely to dominate the return migration flow. We argue that in other respects too, the model of Coniglio et al. is not based on reasonable assumptions, and that even under the postulated assumptions, the model suffers from several inconsistencies. In particular, when the rate of return to savings is an increasing function of skill level, we would expect there to be few better‐skilled individuals among illegal migrants in the first place. Also, an obvious distinction between savers and borrowers is ignored.     

The Prospect of Migration,Sticky Wages,and “Educated Unemployment”

An increase in the probability of work abroad, where the returns to schooling are higher than at home, induces more individuals in a developing country to acquire education, which leads to an increase in the supply of educated workers in the domestic labor market. Where there is a sticky wage rate, the demand for labor at home will be constant. With a rising supply and constant demand, the rate of unemployment of educated workers in the domestic labor market will increase. Thus, the prospect of employment abroad causes involuntary “educated unemployment” at home. A government that is concerned about “educated unemployment” and might therefore be expected to encourage unemployed educated people to migrate will nevertheless, under certain conditions, elect to restrict the extent of the migration of educated individuals.     

Optimal execution of open-market stock repurchase programs

This paper formalizes the following intuition about open-market share repurchases. Firms do open-market share repurchases to return free cash, which would otherwise be wasted. However, when the firm goes to buy its own shares with this cash, it has inside information and hence the actual execution is characterized by adverse selection. The market knows that the firm has inside information, and consequently the ask price is high to compensate for this adverse selection problem. This implies that, all else equal, the greater the adverse selection problem compared to the cash waste problem, the higher the ask price, and, therefore, the wider the bid–ask spread and the lower the share repurchase completion rate. We test this implication on a sample of U.S. firms and report evidence consistent with the model.     

Efficient agglomeration of spatial clubs

We investigate here the agglomeration of spatial clubs in an efficient allocation of a club economy. The literature on agglomeration has focused largely on a primary agglomeration caused by direct attraction forces. We concentrate mainly on secondary and tertiary agglomerations caused by a primary agglomeration. Initially, scale economies in the provision of club goods (CGs) lead each CG to agglomerate in facilities of its club. This primary agglomeration causes a secondary concentration of population around these facilities, which in turn brings about a tertiary agglomeration of facilities of different clubs into centers in the midst of population concentration. The agglomeration of facilities occurs only if a secondary concentration of population takes place. We analyze in detail two specific patterns of agglomeration. One is the central location pattern in which the facilities of all clubs agglomerate perfectly in the middle of the complex. The second is a triple-centered complex in which the center in the middle of the complex consists of perfectly agglomerated facilities of different clubs, each with a single facility per complex. The remaining two centers also consist of facilities of different clubs, but clubs in these centers each have two facilities per complex, one in each center. Each of these two centers is located between a boundary and the middle of the complex closer to the middle of the complex than to the boundary. The facilities in these two centers form condensed clusters of facilities that may contain residential land in between the facilities. We then show that these agglomeration patterns also characterize agglomerations in general. The literature maintains that an efficiently behaving municipality increases its tax-base. This implies that it is in the municipality’s interest to achieve efficiency. The best way for a local government to achieve this desired efficiency is by partially intervening in market operations in order to internalize local externalities. Such an intervention should be limited to providing the city’s infrastructure, to taxing only residential land rents and clubs’ profits, to subsidizing the basic industry of the city, and to partially regulating land uses. Consequently, if the local governments of all complexes behave according to the above, the decentralization of the efficient allocation of the club economy would be attained.     

Social value and content value in social media: Two paths to psychological well-being

The unique characteristics and universal popularity of social media enable consumers to experience their customer value and thus improve their psychological well-being. Hence, it is important for researchers to investigate how consumers experience their customer value in this new media and demonstrate how managers can use the ensuing knowledge for designing appropriate marketing strategies. This article is a step toward that direction. We explore the antecedents and consequences of customer value in social media so as to provide a deeper insight into consumer behavior and subsequently discuss its managerial implications. Specifically, we develop a model that incorporates psychological well-being as the endogenous variable, interdependence self-construal and independent self-construal as exogenous variables, and social value, content value, social identity, self-esteem, and flow as mediating variables. Based on data from a sample of 437 social media consumers collected by an online survey and through analysis of the data by SPSS 22.0 and Amos 22.0 programs, the study revealed that consumers can gain psychological well-being by either of two paths: consumers with a higher degree of interdependent self-construal will have a higher degree of social value experience, thus leading to a higher degree of psychological well-being through a positive mediating role of social identity; whereas consumers with a higher degree of independent self-construal will have a higher degree of content value experience, thus leading to a higher degree of psychological well-being through a positive mediating role of self-esteem. Managers can segment the consumers based on their self-construal and design appropriate customer relationship strategies.     

Death of the “organization man”: Temporal relations in strategic alliances

Environment is shifting the power balance between the organization and its members, providing the individual with the power to bargain with the organization. The present article explores the sources and consequences of this change for the individuals who are members of strategic alliances as well as for the organizations they are affiliated with. © 1995 John Wiley & Sons, Inc.     

A note on the shadow wage in LCDs with migration and formal and informal urban sectors

Given induced rural-to-urban migration, the social cost of (unskilled) labour for urban public sector projects is shown to be lower than the formal-sector, exogenously-determined wage. This result is valid not only when the urban alternative to formal employment is unemployment but also (and more realistically) when the relevant alternatives are formal employment, informal employment and unemployment.     

The meaning of industrial prestige

In light of the growing interest in industries as distinct units in the structure of stratification, this research explores the dimensions underlying the social evaluation of industries, with an emphasis on the meaning of industrial prestige. The data collected for this purpose consist of multiple ratings of the banking and insurance industries by a national sample of Israelis. The empirical findings indicate, first, that there exists virtual concensus about all the ratings across various demographic and socioeconomic categories and, second, that industrial prestige is related to instrumental rather than normative considerations of industrial behavior. These results are discussed in terms of the specific characteristics of banking and insurance as well as in terms of the general debate over the meaning of prestige scales of occupations.     

A Time-Series Analysis of Corporate Payout Policies

I conduct a time-series analysis of corporate payout policies that accounts for the dynamic nature of these decisions and for the interaction among investment decisions and payout policies. The estimation is done with a VAR model of investments, earnings, total payout, and the split of the total payout between dividends and share repurchases. I control for changes in the legal treatment of share repurchases in 1982 and for changes in the relative taxation of dividends and capital gains. I find that: (i) an increase in the taxation of capital gains relative to dividends shifts the split of total payout away from share repurchase and toward dividends; (ii) corporate investment decisions lead payout policies and not the other way around; (iii) increases in corporate total payout are associated with long-term subsequent increases in earnings; (iv) changes in the composition of corporate payout away from share repurchases and toward dividends are associated with subsequent increases in earnings.