Can Managers Successfully Time the Maturity Structure of Their Debt Issues?

This paper provides a rational explanation for the apparent ability of managers to successfully time the maturity of their debt issues. We show that a structural break in excess bond returns during the early 1980s generates a spurious correlation between the fraction of long‐term debt in total debt issues and future excess bond returns. Contrary to Baker, Taliaferro, and Wurgler (2006) , we show that the presence of structural breaks can lead to nonsense regressions, whether or not there is any small sample bias. Tests using firm‐level data further confirm that managers are unable to time the debt market successfully.     

Effects of Firm Size,Financial Leverage and R&D Expenditures on Firm Earnings: An Analysis Using Quantile Regression Approach

As documented in the literature, the effects of firm size, financial leverage, and R&D expenditures on firm earnings are inclusive. Our hypothesis is that the inconsistent empirical results of such effects may be driven by the regression models implemented in data analysis. Using the quantile regression (QR) approach developed by Koenker and Basset (1978), this study analyses S&P 500 firms from 1996 to 2005. We find that the effects of firm size, financial leverage and R&D expenditures on firm earnings differ considerably across earnings quantiles. Comparing the results from the QR approach with those from the ordinary least squares (OLS) and least absolute deviation (LAD) methods, this study further explains the puzzling relationship between firm size, financial leverage, R&D expenditures and firm earnings.     

Consumption Fluctuations and Expected Returns

This paper introduces a novel consumption-based variable, cyclical consumption, and examines its predictive properties for stock returns. Future expected stock returns are high (low) when aggregate consumption falls (rises) relative to its trend and marginal utility from current consumption is high (low). We show that the empirical evidence ties consumption decisions of agents to time variation in returns in a manner consistent with asset pricing models based on external habit formation. The predictive power of cyclical consumption is not confined to bad times and subsumes the predictability of many popular forecasting variables.     

Do Household Wealth Shocks Affect Productivity? Evidence from Innovative Workers During the Great Recession

We investigate how the deterioration of household balance sheets affects worker productivity, and in turn economic downturns. Specifically, we compare the output of innovative workers who experienced differential declines in housing wealth during the financial crisis but were employed at the same firm and lived in the same metropolitan area. We find that, following a negative wealth shock, innovative workers become less productive and generate lower economic value for their firms. The reduction in innovative output is not driven by workers switching to less innovative firms or positions. These effects are more pronounced among workers at greater risk of financial distress.     

SAVINGS MOBILIZATION,FINANCIAL DEVELOPMENT AND LIBERALIZATION: THE CASE OF MALAYSIA

This paper attempts to identify the key factors behind Malaysia's remarkable savings performance. Drawing on the life cycle theory, the saving function is estimated by incorporating other relevant structural features and institutional settings of the Malaysian economy into the specification. Particular emphasis has been placed on the roles of financial factors in mobilizing funds in the private sector. The results suggest that financial deepening and increased banking density tend to encourage private savings. Development of insurance markets and liberalization of the financial system, however, tend to exert a dampening effect on private savings.     

In-Kind Food Assistance and Consumer Food Choice

In-kind food assistance was the mainstay of federal food programs until the food stamp program expanded. Analysis of aggregate data suggests that large donations of cheese and butter since 1982, through the Temporary Emergency Food Assistance Program, replaced recipients’ normal purchases of the donated products, reduced consumption of close substitutes, and increased consumption of certain other protein foods. Programs of this type appear to have limited ability to enhance total demand for products in surplus.     

Welfare Loss from Inaccurate Information: An Economic Model with Application to Food Labels

This study develops an economic framework which explains the welfare loss to consumers from imperfect information and provides a mechanism for analyzing the benefits from improved information. The model is applied to imperfect net weight information for packaged chicken and empirical estimates of the resulting welfare loss are obtained.