The Integration of Insurance and Taxes in Corporate Pension Strategy

This paper examines the implications of the joint effects of insurance and taxes for the optimal corporate pension strategy. It is shown that neither the “mini-max” nor the “maxi-min” strategy advocated by previous authors is necessarily best in corporate pension management. In the presence of capital market imperfections, the analysis via a single-period contingent-claims model indicates that optimal corporate pension strategy in both asset-allocation and funding decisions can be a noncorner interior solution.     

Forecasts of earnings per share: Possible sources of analyst superiority and bias*

Abstract. Previous research has shown that analysts' forecasts of quarterly earnings per share (EPS) are more accurate than those of accepted time-series models. In addition, some previous research suggests that, on average, analysts' forecasts tend to be optimistic (i.e., biased). Two explanations for analysts' superiority have been proposed: (1) analysts use more recent information than can time-series models and (2) analysts use forecast-relevant information not included in the time-series of past earnings. This paper provides evidence on a third potential source of analyst superiority: the possibility that humans can use past earnings data to predict future earnings more accurately than can mechanical time-series models. We find that human judges do no worse than accepted time-series models when both use the same information set: namely, the series of past EPS figures. To date, little or no research has attempted to determine why analyst bias might exist. Still, some possible reasons have been forwarded. First, pessimistic forecasts or reports may hinder future efforts of the analyst or the analyst's employer to obtain information from the company being analyzed. Second, forecast data bases may suffer a selection bias if analysts tend to stop following those firms that they perceive as performing poorly. This study proposes, and provides evidence regarding, a third possible explanation for analyst bias: the use of judgmental heuristics by analysts. Many studies have shown that human predictions are often biased because of the use of such heuristics. We present evidence that suggests this may be the case for analysts' forecasts of earnings per share. Résumé. De précédents travaux de recherche ont démontré que les prévisions des analystes relatives au bénéfice par action (BPA) trimestriel sont plus exactes que celles que permettent d'obtenir les modèles reconnus basés sur les séries chronologiques. De plus, les résultats de certains travaux de recherche laissent croire qu'en moyenne, les prévisions des analystes tendent à être optimistes (c'est-à-dire biaisées). Deux explications à cette supériorité ont été proposées: 1) l'information que les analystes utilisent est plus récente que celles utilisées dans les modèles fondés sur les séries chronologiques et 2) les analystes utilisent de l'information pertinente aux prévisions qui ne figure pas dans les séries chronologiques relatives aux bénéfices passes. Les auteurs attribuent à un troisième facteur potentiel cette supériorité: la possibilité pour les humains d'utiliser les données relatives aux bénéfices passés pour prédire les bénéfices futurs de façon plus précise que ne le peuvent les modèles fondés sur les séries chronologiques. Ils en viennent à la conclusion que les humains obtiennent des résultats tout aussi efficaces que les modèles chronologiques reconnus lorsqu'ils utilisent un jeu de renseignements identique, soit les données historiques relatives au BPA. Jusqu'à maintenant, peu de chercheurs, sinon aucun, ont tenté de déterminer à quoi tiendrait l'existence d'un biais chez l'analyste. Malgré tout, certaines explications possibles ont été proposées. Premièrement, les prévisions ou les rapports pessimistes peuvent faire obstacle aux efforts futurs de l'analyste ou de son employeur pour obtenir de l'information de la société faisant l'objet de l'analyse. Deuxièmement, les bases de données servant à la prévision peuvent être entachées d'un biais de sélection si les analystes ont tendance à cesser de suivre les entreprises qui leur semblent afficher une piètre performance. Les auteurs proposent et attestent une troisième explication possible du biais de l'analyste: l'utilisation de méthodes heuristiques fondées sur le jugement. De nombreuses études ont démontré que les prédictions humaines sont souvent biaisées par suite de l'utilisation de ces méthodes heuristiques. Les auteurs apportent des arguments qui permettent de croire que ce pourrait être le cas des prévisions des analystes du bénéfice par action.     

International Capital Structure Equilibrium

This paper develops a theory of capital structure in an international setting with corporate and personal taxes. We generalize the Miller analysis to an international equilibrium characterized by differential international taxation and inflation in otherwise perfect international capital markets. Our analysis highlights the key role that corporate tax arbitrage plays in generating an international capital structure equilibrium, and we set forth a number of mechanisms for tax arbitrage transactions. We close the paper by outlining some implications of our analysis for national differences in capital structure, the International Fisher Effect, and international tax effects on yield differentials.     

The Puzzle of Financial Leverage Clienteles

Empirically, it appears that common stock of publicly traded corporations with high-debt ratios tends to be held by investors with relatively low marginal taxes while the stock in companies with little debt is held by investors in high-tax brackets. A number of authors have argued that in an equilibrium similar to the one described by Miller [8], these clienteles should exist. We argue that standard portfolio theory does not imply financial leverage clienteles for publicly traded firms. We explain the empirical relationship between investor tax rates and leverage ratios by the existence of dividend clienteles and a positive relationship between dividend yield and leverage ratios.     

Textile marketing: a status report

This exploratory study investigated the status of textile marketing in the United States by (a) examining the textile industry's use of effective marketing techniques, and (b) identifying common problems and needed improvements in textile marketing. The procedure followed these steps: (a) effective marketing techniques were identified, (b) interviews were conducted with nine textile executives and four individuals representing the United States textile industry at large, and (c) the respondents' statements about textile marketing practices were analysed for evidence of effective marketing techniques, common textile marketing problems and needed inprovements in textile marketing. The results indicated that only five of the thirteen respondents described textile firms that were using effective marketing techniques, but some textile firms were using effective marketing techniques and this should be an incentive for other textile firms. Several common problems and needed improvements in textile marketing were also identified. Because of the small sample size, the open-ended questions, and the subjective analysis of the respondents' statements, this study must be regarded as exploratory. However, representative statements from the respondents are presented and these statements are informative about textile marketing practices.     

An Approach to Evaluation of a Computer-Aided Management System

Abstract— A method is described which was developed to evaluate the “behavior” characteristics of a computer program used for R&D Resource Allocation. Results are included for the application of this method to a computer-aided decision process previously used in the Air Force Flight Dynamics Laboratory at Wright-Patterson Air Force Base. This evaluation method is possibly applicable in general to other computer-aided management systems.