Youth Wages, Risk, and Tertiary Finance Arrangements*

Human capital earnings functions typically explain a small fraction of the total variation in earnings. The considerable uncertainty associated with expected future earnings streams enhances the desirability of a loans scheme for higher education possessing income contingent characteristics on the repayment side. The Higher Education Contribution Scheme (HECS) possesses this feature The profitability of higher education even after taking account of the HECS suggests there is scope for higher student contributions. Other possible modifications to the HECS include higher repayment rates, a change to the tax base, and a minimum repayment amount     

Common Stock Returns and Rating Changes: A Methodological Comparison

This paper examines the adjustments in a firm's common stock price during the eleven months before and during the month of announcement of a bond rating change. Based on several different measures of abnormal security return, the findings are consistent with the proposition that bond downgradings convey information to common stockholders. For bond upgradings, the price adjustments were statistically insignificant in the month of announcement, although in the eleven preceding months, upgraded firms exhibited positive abnormal returns. While the results do not fully support earlier research, we stress that the main contribution of this article lies in the scrutiny it gives to issues of methodology in assessing the possible price effects of bond reclassifications.     

The Choice Between Equity and Debt: An Empirical Study

This empirical study of security issues by UK companies between 1959 and 1974 focuses on how companies select between financing instruments at a given point in time. It throws light on a number of interesting questions. First, it demonstrates that companies are heavily influenced by market conditions and the past history of security prices in choosing between debt and equity. Second, it provides evidence that companies appear to make their choice of financing instrument as if they have target levels of debt in mind. Finally, the results are consistent with the notion that these target debt levels are themselves a function of company size, bankruptcy risk, and asset composition.     

Original Issue High Yield Bonds: Aging Analyses of Defaults,Exchanges, and Calls

This paper presents an aging analysis of 741 high yield bonds and finds default, exchange, and call percentages substantially higher than reported in earlier studies. By December 31, 1988, cumulative defaults are 34 percent for bonds issued in 1977 and 1978 and range from 19 to 27 percent for issue years 1979–1983 and from 3 to 9 percent for issue years 1984–1986. Exchanges are also a significant factor although they often are followed by default. Moreover, a significant percentage of high yield debt, 26–47 percent for 1977–1982, has been called. By December 31, 1988, approximately one third of the bonds issued in 1977–1982 has defaulted or been exchanged, and an additional one third had been called. On average, only 28 percent of these issues are still outstanding. There is no evidence that early results for more recent issue years differ markedly from issue years 1977 to 1982.     

On the comparison of dollar-unit and stratified mean-per-unit estimators

Abstract. The paper discusses the findings reported by Smieliauskas (1986) and expands on them. It focuses on the dominance criterion for cost efficiency and on the usefulness of power curves for stratified mean-per-unit estimators. The analyses lead to the conclusions that: (1) while an audit plan which dominates another is associated with lower cost, a plan with lower cost does not necessarily dominate: (2) the distribution function of the t statistic becomes normal for sufficiently large samples, but the approach to normality is not necessarily uniform as sample size increases; (3) large sample size is required for nominal confidence levels to be a good approximation to the true confidence level, and the true confidence level can move temporarily farther from the nominal level as the sample size increases; and (4) the lack of reliability of ex ante power curves for the stratified mean-per-unit estimator makes it difficult to decide which power curve dominates. Résumé. Cet article discute des résultats publiés par Smielauskas (1986) et les extrapole. Il met l'accent sur le critère de dominance pour l'efficacité des coûts et sur l'efficacité des courbes de puissance pour les estimateurs de moyenne-par-unité stratifiée. Les analyses portent à conclure que: (1) même si un programme de vérification dominant par rapport à un autre est associé à un coût inférieur, un programme à coût inférieur n'est pas nécessairement dominant; (2) la fonction de distribution de la statistique t tend vers la normale pour des échantillons suffisamment grands, mais ce rapprochement vers la normalité n'est pas nécessairement uniforme à mesure que la taille de l‘échantillon devient plus grande; (3) un échantillon de grande taille est requis afin que les seuils de confiance “nominaux” constituent une bonne approximation du seuil de confiance “réel”, et le seuil de confiance “réel” peut s’éloigner temporairement du seuil de confiance “nominal” à mesure que s'accroît la taille de l‘échantillon; et (4) l'absence de fiabilité des courbes de puissance ex ante pour l'estimateur de moyenne-par-unité stratifiée rend ardue la sélection de la courbe de puissance dominante.