A Time-Series Analysis of Corporate Payout Policies

I conduct a time-series analysis of corporate payout policies that accounts for the dynamic nature of these decisions and for the interaction among investment decisions and payout policies. The estimation is done with a VAR model of investments, earnings, total payout, and the split of the total payout between dividends and share repurchases. I control for changes in the legal treatment of share repurchases in 1982 and for changes in the relative taxation of dividends and capital gains. I find that: (i) an increase in the taxation of capital gains relative to dividends shifts the split of total payout away from share repurchase and toward dividends; (ii) corporate investment decisions lead payout policies and not the other way around; (iii) increases in corporate total payout are associated with long-term subsequent increases in earnings; (iv) changes in the composition of corporate payout away from share repurchases and toward dividends are associated with subsequent increases in earnings.     

On the relationship between the number of a broker’s real estate listings and transaction outcomes

This paper documents that sellers who employ brokerage offices that list a large number of properties (“active brokerages”) obtain higher selling prices, smaller negotiated discounts from the corresponding list prices, and shorter times on the market for their listed properties. Sellers who employ active brokerages list their properties at prices that are closer to our hedonic model’s predicted prices. Interestingly, properties that are listed at discounts relative to their predicted prices are snapped up more quickly only if they are associated with brokerages that list a relatively small number of properties. In addition, properties listed by active brokerages are less likely to be listed “as is” and are more likely to have their defects repaired prior to being listed. Moreover, because the efficacy of brokerage services varies across brokerage offices, the results also suggest that the use of an indicator variable for the use of brokerage services is not sufficient to capture the complete impact of the use of a real estate broker on transaction outcomes. In addition, the Appendix discusses the concern for potential endogeneities between the number of brokerage listings and transaction outcomes. It documents that the Durban–Wu–Hausman test indicates that exogeneity cannot be rejected.     

Do security breaches matter? The shareholder puzzle

This article analyzes the effect of computer breaches on publicly traded equities from 2005 to 2017. An event study is performed and breaches analyzed conditioned on whether the breach announcement has been made in the mainstream media or through other channels. We find that in the period prior to the announcement date in the media, the mean abnormal return is negative, reflecting a likely leakage of information. In the period following the announcement date, the mean abnormal return is positive, often more than offsetting the previous declines. The findings have important implications for analysts, portfolio managers, institutional investors, and regulators.     

Price discrimination in service industries

This article outlines recent methods and applications directed at understanding the profit and consumer welfare implications of increasingly prevalent price discrimination strategies in the service sector. These industries are typically characterized by heterogeneity in consumers?? valuation and usage of the service, resale constraints, and a focus on price as the service??s key attribute. The article focuses on how firms use nonlinear pricing or bundling strategies to benefit from the heterogeneity in consumer demand. We describe the basic economic model commonly used in the literature to analyze such strategic choices and present recent methodological improvements to this benchmark. A discussion of existing applications and future research opportunities concludes the article.     

Why Do Firms Announce Open-Market Repurchase Programs?

Empirically, a price increase accompanies the announcement ofan open-market stock repurchase program, even though the announcementis not a commitment. In fact, for many announced programs noshares are ever actually repurchased. This article exploresthis puzzle. In the single-firm-type version of the model, theoption that a firm grants itself by announcing a program doesnot generate announcement returns. In equilibrium, long-rungains from the informed trading that the option creates areoffset by short-run costs from the market's accounting for thisadverse selection. Based on this trade-off, I construct a signaling(two-type) model that can deliver announcement returns. In theseparating equilibrium, good firms do not incur any cost whenthey announce programs. Their gains from informed trading inthe long run offset the cost of announcement incurred in theshort run. Mimicry is costly, because a bad firm's long-rungains from informed trading cannot compensate for the short-runcost of announcing.     

Interest Rates Fluctuations and the Advantage of Long-Term Debt Financing: A Note on the Effect of the Tax-Timing Option

When interest rates fluctuate, issuing long-term debt may implicitly generate a valuable tax-timing option. The holder of long-term debt has an optimal-trading taxtiming option to immediately realize capital losses if an increase in interest rates lowers the price of the bond below the original issue price. In contrast, if interest rates decrease and the bond price is greater than the original issue price, the holder would prefer to defer the realization of capital gains. This tax-timing option confers an advantage for issuing long-term debt. Our formal presentation also highlights how the tax-timing options of long-term debt may increase the debt capacity of the firm.