NUCLEAR POWER, SYSTEMATIC RISK, AND THE COST OF CAPITAL

Previous studies of the effects of adoption of nuclear technologies by electric utilities have concentrated on the period following the catastrophe at Three Mile Island (TMI) in 1979. The purpose of this study is to test whether increased risk effects on equity costs of nuclear-adopting utilities existed prior to that event. This study, using panel data and beta measures of systematic risk, concludes that a positive, significant, and persistent nuclear adoption effect existed even prior to TMI. Nuclear adoption increased equity costs, on average, 0.8 percent for periods following the adoption event. This is of the same order of magnitude as adoption effects estimated in other studies for the post-TMI period.     

The Effects of Unions on Firm Behavior: An Empirical Analysis Using Firm-Level Data

We evaluate the use of firm-level union coverage rates in empirical models of firm behavior and performance. We focus on the potential for measurement error in both firm- and industry-level data, and find that firm-level union coverage rates provide more precise estimates of union effects. Higher union coverage at a firm is associated with slower employment and sales growth, decreased productivity in nonmanufacturing firms, increased productivity in manufacturing firms, lower profitability, and less investment in durable assets, such as research and development.     

Shelf Registrations and Shareholder Wealth: A Comparison of Shelf and Traditional Equity Offerings

This study examines the effect of issuing common stock on shareholder wealth under two alternative methods of registration, shelf registration under the Securities and Exchange Commission's Rule 415 and the traditional method of registering shares for immediate sale. The stock price reactions accompanying security registrations and offerings over the period from March 1982 through November 1983 are examined for over two hundred issues. A negative price reaction is observed for traditional and shelf registrations for both utility and non-utility issuers. No statistically significant difference is observed between shelf and traditional registrations. Further negative price reactions precede the offerings of these securities.     

The Cost of the C.A.F

Membership of the Common Market has raise the costs of some food to almost 5 times as much as comparable world prices. Why should the British housewife or taxpayer continue to subsidise inefficient continental farmers?     

The Predictive Content of Earnings Forecasts and Dividends

This paper compares the properties of dividend announcements and management earnings forecasts as predictors of earnings and firm value. First, the two predictors are compared on the basis of their ability to predict earnings. Then the information they convey about firm value is assessed by comparison of the performance of investment strategies based on values of the two predictors. Finally, the effects of dividend announcements on stock prices are considered.     

The Determination of Fair Profits for the Property-Liability Insurance Firm

Single period and dynamic valuation models in continuous time, under certainty and uncertainty, are developed for a property-liability insurance contract to determine the “fair” (competitive) premium and underwriting profit. The intertemporal stochastic model assumes that the claim frequency and the price index of claim settlements are functions of a set of underlying state variables which follow a multivariate Wiener process. The competitive premium is shown to be proportional to the claim frequency and the price index for claim settlements at the time the policy is issued. The factor of proportionality varies directly with the claim settlement rate and the length of coverage, and inversely with the risk-adjusted real interest rate on the dollar-valued claim rate.     

Federal Deposit Insurance,Regulatory Policy,and Optimal Bank Capital*

This paper seeks to explain the combination of explicit and implicit pricing for deposit insurance employed by the FDIC. Essentially, the FDIC sells two products—insurance and regulation. To span the product space, it must and does set two prices. We argue that the need to establish regulatory disincentives to bank risk-taking is the heart of the controversy over the adequacy of bank capital and that the ability to close risky banks before exhausting their charter value (i.e., the value of their right to continue in business) stands at the center of these disincentives and in front of the FDIC's insurance reserves.