Hedge Fund Activism, Corporate Governance, and Firm Performance

Using a large hand-collected data set from 2001 to 2006, we find that activist hedge funds in the United States propose strategic, operational, and financial remedies and attain success or partial success in two-thirds of the cases. Hedge funds seldom seek control and in most cases are nonconfrontational. The abnormal return around the announcement of activism is approximately 7%, with no reversal during the subsequent year. Target firms experience increases in payout, operating performance, and higher CEO turnover after activism. Our analysis provides important new evidence on the mechanisms and effects of informed shareholder monitoring.     

The Long-Lasting Momentum in Weekly Returns

Reversal is the current stylized fact of weekly returns. However, we find that an opposing and long‐lasting continuation in returns follows the well‐documented brief reversal. These subsequent momentum profits are strong enough to offset the initial reversal and to produce a significant momentum effect over the full year following portfolio formation. Thus, ex post, extreme weekly returns are not too extreme. Our findings extend to weekly price movements with and without public news. In addition, there is no relation between news uncertainty and the momentum in 1‐week returns.     

SENIORITY SEATING AT THE ROYAL OPERA HOUSE

This paper examines lotteries and seniority queues as formsof commodity bundling price discrimination. There are good andbad seats, and two types of potential purchasers. Offered thechoice of a high-priced good seat and a moderately-priced bundleof good and bad seats, cutomers self-select into high and lowvaluation types. For single period purchases, the bundle isa lottery over good and bad seats. For repeated purchases, monopolistssuch as the Royal Opera House can do better by setting up aseniority allocation system.     

Growth and Public Debt: What Are the Relevant Trade‐Offs?

The interplay between growth and public debt is addressed considering a Barro‐type (1990) endogenous growth model where public spendings are financed through taxes on income and public debt. The government has a target level of public debt relative to GDP, and the long‐run debt‐to‐GDP ratio is used as a policy parameter. We show that when debt is a large enough proportion of GDP, two distinct balanced‐growth paths (BGPs) may coexist, one being indeterminate. We exhibit two types of important trade‐offs associated with self‐fulfilling expectations. First, we show that the lowest BGP is always decreasing with respect to the debt‐to‐GDP ratio while the highest one is increasing. Second, we show that the highest BGP, which provides the highest welfare, is always locally indeterminate while the lowest is always locally determinate. Therefore, local and global indeterminacy may arise and self‐fulfilling expectations appear as a crucial ingredient to understand the impact of debt on growth, welfare, and macroeconomic fluctuations. Finally, a simple calibration exercise allows to provide an understanding of the recent experiences of many OECD countries.     

Commitment Approach to Motivating Community Recycling: New Zealand Curbside Trial

An urban community in New Zealand was the site of a field experiment designed to assess different approaches to increasing household participation in a cnrbside recycling program. Two different commitment interventions were delivered using a 2 × 2 factorial design, and weekly participation data were collected over 12 weeks. Half of the households were asked to make an explicit verbal commitment to participate in the program, while half were not. Half of the households were also requested to pay for their recycling bins, while half received bins free of charge. All households received the same educational and promotional information, specifically designed to maximize participation, regarding program details. The verbal commitment intervention significantly increased participation relative to the no commitment intervention, while difficulties in the operationalization of the financial commitment intervention made it difficult to assess its validity as a construct. Notably, differences in participation rates between the control group, who received only educational and promotional materials, and the experimental treatment groups were not statistically significant. The discussion focuses oh the increasing importance of well-designed educational materials for encouraging voluntary curb-side recycling.     

Product Liability in the European Community: The Legislative History

This article analyzes the complex history of the important new product liability directive of the European Community. The member countries must amend their laws and meet the directive's proconsumer standards and spirit. The lengthy political evolution of this policy involved many aggressive constituencies, including nations, parts of the European Community governance structure, business federations, consumer organizations, and other functional interest groups.     

Consumer Reaction to Nutritional Labels on Food Products

In order to design the most useful instruments of consumer protection, it is necessary to understand how consumers perceive and use such instruments. Often, basic consumer rights are considered more extensively in the design of consumer protection policies than basic patterns of consumer behavior and motivation. We are more likely to make information on labels complete as viewed by the expert than useful in the normal behavior of the consumer. This study is devoted to discovering how consumers perceive nutritional labels on food products. It draws conclusions about their meaning and usefulness to consumers.     

An Emerging Model for Purchase and Consumption of Non-Prescription Drugs

This paper presents the results of exploratory surveys which describe the behavior of the buyer and consumer of over-the-counter (OTC) drugs. The results are summarized in a simple decision model which describes the information search process under various conditions of symptom severity, user satisfaction and brand familiarity. Implications are discussed for regulating problem consumption. In particular, advertising and labeling regulations seem unlikely to reduce patterns of heavy usage observed in the research. Problems arising from the self medication process must be examined in a broader context of health care behavior.