Capital structure and large investment projects

This paper provides empirical evidence that lumpy investment projects provide firms with the opportunity to adjust leverage at low marginal cost. Consistent with a theoretical model, I find that 1) firms sequence equity before debt during the financing period of their investment projects, and 2) that firms adjust their leverage ratios toward their target leverage during these investment periods. I also show that proactive increases in leverage observed in other studies can be explained by the evolution of firms' target leverage ratios over the financing period of a project. My results are consistent with trade-off theory and imply that firms move toward their target capital structures when they invest.     

‘We’ are more likely to endorse than ‘I’: the effects of self-construal and brand symbolism on consumers’ online brand endorsements

Recent research increasingly highlights that consumers engage in online brand endorsements (e.g. Facebook likes) to signal their identity, but has failed to explain why different consumers use this type of signaling to differing degrees. This paper addresses this gap by looking at a culturally constructed individual difference variable, namely self-construal. Self-construal, which can be independent or interdependent, refers to the extent that people define themselves in terms of the relations they have with others. In four studies, this research shows that consumers’ self-construal is related to their intention to endorse brands online. In particular, high levels of interdependent self-construal positively affect consumers’ intention to endorse brands online (Studies 1A & 1B). This effect is mediated by an increased perception of brands’ symbolic value (Study 2). Moreover, this positivity bias toward symbolic brand cues is conditional upon consumers’ brand attitude (Study 3). These findings demonstrate that consumers’ identity plays a central role in their brand perception and brand-related social media use.     

Robert P. Bremner. Chairman of the Fed: William McChesney Martin, Jr., and the Creation of the Modern Federal Reserve System. New Haven, Conn.: Yale University Press, 2004. vi + 357 pp. ISBN 0-300-10508-8, $38.00.

Two men headed the Federal Reserve System for 40 percent ofits history. One was Alan Greenspan, who served from 1987 to2006. The other was William McChesney Martin, Jr., who chairedthe U.S. central bank from 1951 to 1970. Although there areother contenders, both Martin and Greenspan have their backersfor designation as America’s greatest central banker.Hence, as the Greenspan era at the Fed ends, it is more thanappropriate that Robert Bremner’s excellent biographyof Martin appears. Because it contains insights into     

Seasoned Equity Issues in a Closely Held Market: Evidence from France

This paper examines seasoned equity offerings in France. Eventhough a rights offering is the primary flotation method, Frenchcompanies are increasingly using the relatively expensive publicoffering method. We show that the market reaction to the announcementof seasoned equity issues is significantly negative for rightsissues and insignificantly negative for public offerings. Ourresults suggest that the adverse selection effect is greaterfor rights issues than for public offerings, due to strongerunderwriter certification for the public offerings. We findthat the share price effect is positively related to blockholderstake-up renouncements for firms with prior concentrated ownership.For these firms, the favourable ownership dispersion effectoffsets the adverse selection effect. JEL Classification: G32,G14 and D80.     

Factors Affecting Technical Efficiency among Coffee Farmers in Côte d’Ivoire: Evidence from the Centre West Region

This paper presents measures of technical efficiency for a sample of 81 peasant farmers in the low‐income region of Côte d’Ivoire. DEA techniques were used to compute farm‐level technical efficiency (TE) measures. The analysis reveals average levels of technical efficiency equal to 36 per cent and 47 per cent respectively for the CCR ( Charnes et al., 1978 ) and BCC ( Banker et al., 1984 ) models. These results suggest that substantial gains in output and/or decreases in cost can be attained given existing technology. In a second step analysis, two‐limit Tobit regression techniques were used to examine the relationship between TE and various farm/farmer characteristics. From a policy point of view, an important conclusion stemming from the analysis of our sample is that family size, membership to farmer's club or association and the origin of the farmer are the variables found to be most promising for action. The analysis suggests that policymakers should foster the development of the formal farmers’ club or association by building the capacity of the farmers. Our analysis also supports the argument for public sector involvement in the provision of information on labour force management to peasant farmers as a means to improve efficiency levels, and thus household incomes.