Proxy contests and corporate democracy

A proxy contest is a fight between two management teams to gain proxies from shareholders.The management team which accumulates a majority of votes wins the competition for corpo rate control. This paper attempts to construct a formal model of proxy contests and analyze their implications for the shareholders’ benefit and power of control over the firm.     

Multiple equilibria in two-sector monetary economies: An interplay between preferences and the timing for money

In this paper, we study the occurrence of local indeterminacy in two-sector monetary economies. We consider a general MIUF model with two alternative timings in monetary payments: the Cash-In-Advance timing, in which the cash available to buy goods is money in the consumers’ hands after they leave the bond market but before they enter the goods market, and the Cash-After-the-Market timing, in which agents hold money for transactions after leaving the goods market. We consider three standard specifications of preferences: the additively separable formulation, the Greenwood–Hercovitz–Huffman (GHH) (Greenwood et al., 1988) formulation and the King–Plosser–Rebelo (KPR) (King et al., 1988) formulation. First, we show that for all the three types of preferences, local indeterminacy occurs under the CIA timing with a low enough interest rate elasticity of money demand. Second, we show that with the CAM timing, although determinacy always holds under separable preferences, local indeterminacy can occur with GHH and KPR preferences. We thus prove that compared to aggregate models, two-sector models provide new rooms for local indeterminacy when non-separable standard preferences are considered.     

Emission Allowance as a Derivative on Commodity-Spread

We provide a valuation formula for emission allowance. Assuming that the value of emission allowance on the last day of a trading phase is equal to a spread of commodity prices (e.g. electricity and natural gas) when the spread is positive and less than the penalty, we show that the emission allowance price is equal to the value of a portfolio of European call options on the spread of the commodities. Using the formula, we obtain a hedging strategy for emission allowance trading. We also empirically analyze option value embedded in emission allowance, and find by numerical analysis that the option value is relatively large.     

Impact of initial seeds on the growth of biotechnology startups: evidence from the U.S. and Japan

ABSTRACT

We assess the impact of initial seeds on the long-run growth of biotechnology startups, including the response of the capital market, in the U.S. and Japan. For this purpose, we collected a comprehensive dataset of the matched sample of listed firms from their foundations to the post-IPO period. We find that the quality of initial seeds predicts significantly both the level and the growth rate of the patent stock as well as those of the asset size of the U.S. startups, even controlling for their alliances and acquisitions, while it predicts only the level of the patent stock for the Japanese startups. Furthermore, the asset growth and the patent stock growth in turn account for the market value performances of the U.S. firms much more significantly than those of the Japanese firms. On the other hand, there are only small differences with respect to the time to IPO and the asset growth through the IPO. These results suggest that higher quality of initial seeds significantly enhanced long-run growth of biotechnology startups in the U.S. but not in Japan, and that the differences in fertility of the initial seeds and in efficiency of the capital market could significantly explain the difference.     

Return Dynamics of Japanese Stock Index Options

This paper addresses the return dynamics of stock index options. Distributional moments are suggestive of a skewness preference hypothesis that provides an economic rationale for investors' interest in options. There is no evidence of detectable intermarket arbitrage opportunities from cross- sectional tests of volatility ratio and implied elasticity. Joint tests of market efficiency and parity dynamics suggest that the longer the remaining life of at-the-money options, the higher the likelihood of parity deviations being absorbed in response to percentage index changes. There are also indications of maturing Japanese options markets from rational expectations and parity regression tests.     

Monotonicity and continuity of the critical capital stock in the Dechert–Nishimura model

We show that the critical capital stock of the Dechert and Nishimura (1983) model is a decreasing and continuous function of the discount factor. We also show that the critical capital stock merges with a nonzero steady state as the discount factor decreases to a certain boundary value, and that the critical capital stock converges to the minimum sustainable capital stock as the discount factor increases to another boundary value.     

Equilibrium storage with multiple commodities

This paper introduces a multisector model of commodity markets with storage, where equilibrium is defined by profit maximization, arbitrage and market clearing conditions. We then solve for the decentralized equilibrium via a corresponding dynamic program. We also describe the dynamics of the model, establishing geometric ergodicity, a Law of Large Numbers and a Central Limit Theorem.