Why Do Firms in Customer–Supplier Relationships Hold More Cash?

A firm is in customer–supplier relationships when its business depends on a small number of major customers/suppliers. In this paper, we provide evidence that relationship‐specific investments undertaken by firms in customer–supplier relationships are associated with high cash holdings in these firms. The evidence is consistent with the prediction of Titman's stakeholder theory that a firm relying on relationship‐specific investments maintains a high cash reserve as a cushion to sustain its relationship‐specific investments when negative shocks occur. Our findings suggest that relationship‐specific investments are important determinants of the precautionary motive to hold cash.     

LGBT Neighbourhoods and ‘New Mobilities’: Towards Understanding Transformations in Sexual and Gendered Urban Landscapes

In this article we apply insights from ‘new mobilities’ approaches to understand the shifting sexual and gendered landscapes of major cities in the global North. The empirical context is the purported ‘demise’ of traditional gay villages in Toronto, Canada and Sydney, Australia, and the emergence of ‘LGBT neighbourhoods’ elsewhere in the inner city. We reinterpret the historical geography of twentieth century LGBT lives and the associated ‘rise and fall’ of gay enclaves through the lens of the ‘politics of mobility’. In this reading, it is apparent that multifaceted movements — migration, physical and social mobility, and motility — underpin the formation of gay enclaves and recent transformations in sexual and gendered landscapes. After the second world war, LGBT communities in the global North were embedded in specific historical geographies of mobility and we trace these in the Canadian and Australian contexts. The ‘great gay migration’ from the 1960s to the 1980s has been joined by new LGBT constellations of mobility in the 2000s, and these have imprinted upon the sexual and gendered landscapes of Toronto and Sydney.     

Frequency and Motives for Stock Dividends in a Unique Environment

We investigate the possible differences in the information content of stock dividends between firms that distribute stock dividends frequently (frequent distributors) and firms that distribute stock dividends infrequently (infrequent distributors) using a unique data set from Oman where the market microstructure frictions are either absent or limited. We find that infrequent stock dividend distributors have higher postdistribution operating performance relative to frequent distributors. We also find that the illiquidity measure is significantly related to the announcement effect only for frequent stock dividend distributors, whereas short‐term performance is significantly related to the announcement effect only for infrequent distributors. Our findings indicate that infrequent stock dividends are used mainly to convey favorable private information about the firms’ future prospects, and frequent stock dividends are used to reduce stock price to an optimal trading range in order to improve trading liquidity. JEL classification: G14, G35.     

Can Agents Be Better Off with Pay Caps?

A popular way to discipline the managers of companies or banks that got into trouble during the recent financial crisis has been to impose caps on managers' pay. Using a small extension of the standard principal–agent model, we argue that pay caps might serve the opposite purpose, because the agent might be better off with a pay cap. Specifically, we show that, given a fixed effort level to be implemented, the agent's expected utility can be decreasing in an upper bound for the agent's reward. The effect of pay caps on the general structure of optimal incentive contracts is also characterized. While an improvement of contracting information always helps the principal, it might increase or decrease the marginal cost of imposing pay caps.     

Corporate Lobbying and Firm Performance

Corporate lobbying activities are designed to influence legislators, regulators and courts, presumably to encourage favorable policies and/or outcomes. In dollar terms, corporate lobbying expenditures are typically one or even two orders of magnitude larger than spending by Political Action Committees (PAC), and, unlike PAC donations, lobbying amounts are direct corporate expenditures. We use data made available by the Lobbying Disclosure Act of 1995 to examine this more pervasive form of corporate political activity. We find that, on average, lobbying is positively related to accounting and market measures of financial performance. These results are robust across a number of empirical specifications. We also report market performance evidence using a portfolio approach. We find that portfolios of firms with the highest lobbying intensities significantly outperform their benchmarks in the three years following portfolio formation.     

Likelihood evaluation of models with occasionally binding constraints

Applied researchers interested in estimating key parameters of dynamic stochastic general equilibrium models face an array of choices regarding numerical solution and estimation methods. We focus on the likelihood evaluation of models with occasionally binding constraints. We document how solution approximation errors and likelihood misspecification, related to the treatment of measurement errors, can interact and compound each other.     

Competition and collaboration between public and private sectors: the historical construction of the Spanish hospital system, 1942–86

Throughout history, healthcare, along with diet, has been an essential component of life and a country's welfare. In particular, a country's hospital system is a key indicator for analysing the level of welfare achieved by health coverage. From an economic history perspective, the study of hospital systems is relevant since they stem from public and private investment and produce positive externalities by creating employment and stimulating other economic sectors such as construction and health. Spain provides a significant case study for determining the factors of backwardness in the construction of a modern hospital system in a country on the European periphery. Moreover, it also helps us understand how, despite initial obstacles, this system had attained a significant degree of quality by the end of the twentieth century, as confirmed by its current international hospital rankings and even by the phenomenon of health tourism. The study analyses the creation of the Spanish hospital system during Franco's dictatorship and the transition to democracy. It reveals how the maintenance of a regressive tax system, the use of health policy as political propaganda, and disputes within the political elite of the dictatorship led to an inadequate and fragmented public hospital system, which had to collaborate with the private hospital system, was full of financial holes and tainted by corruption, and remained at the service of privileged groups.     

Multivariate choices and identification of social interactions

This paper considers the identification of social interaction effects in the context of multivariate choices. First, we generalize the theoretical social interaction model to allow individuals to make interdependent choices in different activities. Based on the theoretical model, we propose a simultaneous equation network model and discuss the identification of social interaction effects in the econometric model. We also provide an empirical example to show the empirical salience of this model. Using the Add Health data, we find that a student's academic performance is not only affected by academic performance of his peers but also affected by screen‐related activities of his peers.     

Does Interindustry and Intraindustry Information Help Predict Financial Distress?

This study investigates whether and how the accounting ratios of peer firms within the same industry (the industry peers) or firms within the industry of their customers (the downstream peers) help improve the predictability of sample firm financial distress. We document that the Z‐score factors of the companies with high correlation in stock returns help predict financial distress. The results show that accounting‐based ratios of the industry peers and the downstream peers enhance the accuracy of early warnings of financial distress, especially when prior returns of peer firms are highly correlated with the sample firm.