Event Risk Covenants and Shareholder Wealth: Ethical Implications of the "Poison Put" Provision in Bonds

This paper examines the ethical implications of "poison put" provisions included in bond offerings. A number of firms are using event-risk protections in bond offerings in an effort to attract investors back into the bond market. One of the most common event-risk protections is a "poison put" provision, which allows the bondholder to "put" the bond back to the firm at par or at a premium under certain specified conditions, such as a takeover effort or a downgrading of the bond by rating agencies. While such a provision is obviously of value to the bondholders, there is a secondary effect that is not as obvious. Using such a provision helps to insure that boards of directors must put the interests of all of the stakeholders ahead of any personal interests of the board members, thus protecting the stakeholders. The use of event-risk protections helps to deter takeovers, induce bidders to negotiate with management in any takeover efforts, and avoid two-tier takeover offers. As a result, the "poison put" provisions have a positive impact on share values while simultaneously protecting the investments of bondholders. Such an impact makes the use of "poison put" provisions in bonds an ethical use of management power.     

The rise and fall of Spain (1270–1850)1

Two distinctive regimes are distinguished in Spain over half a millennium. The first one (1270s–1590s) corresponds to a high land–labour ratio frontier economy, which is pastoral, trade‐oriented, and led by towns. Wages and food consumption were relatively high. Sustained per capita growth occurred from the end of the Reconquest (1264) to the Black Death (1340s) and resumed from the 1390s only broken by late fifteenth‐century turmoil. A second regime (1600s–1810s) corresponds to a more agricultural and densely populated low‐wage economy which, although it grew at a pace similar to that of 1270–1600, remained at a lower level. Contrary to pre‐industrial western Europe, Spain achieved its highest living standards in the 1340s, not by mid‐fifteenth century. Although its death toll was lower, the plague had a more damaging impact on Spain and, far from releasing non‐existent demographic pressure, destroyed the equilibrium between scarce population and abundant resources. Pre‐1350 per capita income was reached by the late sixteenth century but only exceeded after 1820.     

Uganda's experience with aid

This paper presents Uganda's experience with aid flows overthe period 1970-96. It discusses the compilation of aid dataand also reviews the chronological developments in aid flowsto Uganda. Over this period, the sectoral distribution and typeof aid is largely dictated by the government's economic programmesin place. The period 1962-71 largely reflects government borrowingfor on-lending to agriculture and industry whereas the period1979-85 shows a wider range of sector-specific programmes drivenby the need to reconstruct and rehabilitate the economy. Althoughthe need to reconstruct and rehabilitate the economy continued,support for policy reform began to take up an increasing proportionof aid over the period 1987-96. We also analyse the impact ofaid on some major macroeconomic variables and find that investmentand real exchange rate developments have been largely drivenby official development aid flows. Although we find a similarrelationship between aid and improved policy environment, thefindings show that in the latter part, i.e., 1992-6, the continuedpolicy reform was driven more by ownership of the programmethan by aid. Indeed, in this latter period, the aid/GDP ratiosdeclined. The major lesson drawn from this study is that ownershipof a reform programme is more critical for its success, henceour conclusion that aid should be used for financing ratherthan buying reforms.     

The influence of earnings per share on capital issues: some evidence from UK companies

This paper investigates the simple hypothesis that when companies issue more capital, they have a tendency to select the type of capital, all other things being equal, which results in the higher short-term earnings per share (eps). The methodology employs probit analysis to test the hypothesis that the form of issue selected was that which gave the higher eps after controlling for other factors such as leverage and industry classification. The results lead us to conclude that there is evidence in capital issues of functional fixation on eps.     

Relative price variability: Evidence from supply and demand events

Previous studies of relative price variability assume that all supply changes are unanticipated or that supply elasticities are equal across markets. In this paper, we extend these models by relaxing these restrictive assumptions. Our resulting theoretical expression for relative price dispersion reveals an independent role for unanticipated and anticipated supply events. Subjecting our model to empirical testing, we find that this dichotomy of supply shocks is not rejected by the data for the period 1970–1981.     

FIML estimation of models with multiple regimes and covariance restrictions

This paper examines the FIML estimator for a system of simultaneous equations in which a structural change, at a known time, has taken place in one or two of the equations, while the rest are unaffected.