A corporate bond innovation of the 90s: The clawback provision in high-yield debt

This paper examines a recent financial innovation in corporate bond contracts, referred to as the clawback provision. A clawback provision in debt contracts gives the issuer an option to redeem a specified fraction of the bond issue within a specified period at a predetermined price and with funds that must come from a subsequent equity offering. We argue that issuers use clawback provisions to mitigate the wealth losses that would otherwise occur when new equity is offered. Consistent with the hypotheses, the evidence shows that bond offerings are more likely to include a clawback provision if their issuers are private, have more intangible assets, have fewer liquid assets, and are unregulated. We also estimate the price of clawback provisions and find that yield spreads on bonds with clawback provisions are a median of 86 basis points higher relative to what they otherwise would be.     

The Use of Interest Rate Derivatives by End-users: The Case of Large Community Banks

This paper investigates the use of interest-rate derivatives by U.S. commercial banks with total assets between $100 million and $1 billion. These banks are interesting, because they allow us to focus on the end-users of interest-rate derivatives rather than dealers. Over our four-year test period, 1990–1993, only 10% of these large community banks, on average about 250 banks per year, used any interest-rate derivatives. We find evidence that the use of interest-rate derivatives is positively related to exposure to interest-rate risk as measured by the absolute value of the 12-month maturity gap. In addition, a community bank's decision to participate in interest-rate contracts is positively related to size. Nevertheless, we find no positive relationship between size and the extent of participation in the derivatives market. Finally, our evidence suggests that banks that participate more heavily in interest-rate swaps have stronger capital positions, an indicator of market or regulatory discipline or both.     

SOME LESSONS FROM THE EAST ASIAN MIRACLE

The rapid economic growth of eight East Asian economies, oftencalled the "East Asian miracle, " raises two questions: Whatpolicies and other factors contributed to that growth? And canother developing countries replicate those policies to stimulateequally rapid growth? This article, based on case studies, econometric data, and economictheory, offers a list of the ingredients that contributed tothat success. But it is the combination of these ingredients,many of which involve government interventions acting together,that accounts for East Asia's success.      

Rural telephony since divestiture

This paper determines whether local rural telephone rates have increased as well as whether rural rates have increased more or less than other telephone rates since the divestiture of AT&T. Also, examined are long distance rates, penetration levels and subsidization in rural telephone markets in an attempt to ascertain whether universal service is in jeopardy in rural areas.The author would like to thank Erwin A. Blackstone, Gerald Faulhaber and Alfred E. Kahn for their helpful comments.     

Framing effects in mixed price bundling

In mixed price bundling, the consumer has the choice of buying the individual products separately, as part of a bundle with a discounted price, or not purchasing them at all. Framing effects refer to how the price of the bundle is presented to the consumer. Past studies have focused on perceptual measures and aggregate level results, and have only looked at a subset of different types of price framing in any one study. In this paper we use discrete choice data to investigate whether price framing affects choice in mixed price bundles. We find that the joint, integrated frame results in the highest proportion of respondents choosing the bundle and the fewest choosing “none.” When the prices of items in a bundle are itemized, some consumers are more likely to compare prices separately to their reference prices to evaluate the attractiveness of the deal, but this actually reduces the probability of purchasing the bundle. However, the majority of consumers do not use reference prices and instead follow a simple economic choice model.

贸易保护与政治利益关系的研究

在国际贸易发展的不同历史发展时期一直存在着贸易保护与政治利益的复杂关系,无论从重商主义时期贸易保护的观点到工业革命时期的自由贸易理论,还是今天发展中国家对幼稚工业的保护和发达国家对衰退产业的保护,无不体现了政治利益在贸易政策中的决定性作用.尽管自由贸易是世界贸易发展的大趋势,但贸易保护仍然是各国制定贸易政策的底线,必将在相当长的时期内与自由贸易并存.     

DIFFÉRENCE DE SATISFACTION DANS L'EMPLOI ENTRE SECTEURS À BUT LUCRATIF ET À BUT NON LUCRATIF: LE RÔLE JOUÉ PAR LES CARACTÉRISTIQUES D'EMPLOI

RÉSUMÉ ** :  Cet article cherche à estimer, pour un échantillon issu de sept pays européens, le différentiel de satisfaction dans l'emploi entre les secteurs à but non lucratif et à but lucratif, et à en examiner les causes. La richesse des données utilisées permet, contrairement aux études antérieures, de prendre en compte les différences de caractéristiques d'emploi entre les deux secteurs. Les résultats obtenus révèlent que la plus grande satisfaction dans l'emploi des salariés du secteur à but non lucratif résulte principalement de caractéristiques mesurant l'autonomie et l'intérêt de l'emploi et d'une plus grande satisfaction vis-à-vis de leur autonomie et de la nature du travail qu'ils effectuent, éléments susceptibles de contribuer au développement de la motivation intrinsèque des salariés.     

An Economic Definition of the Middle Class

The concept of a middle class is prevalent in both common parlance and the social sciences; concern is frequently expressed that the middle class is shrinking, and politicians often position themselves as champions of the middle class. Yet the phrase “middle class” is extremely ambiguous; no consensus exists on either the upper bound or the lower bound separating the middle class from other classes. The present paper employs the government’s official poverty line as the demarcation between the poor and the middle class, and develops an equivalent distinction to separate the middle class from the wealthy. Based on the new definition, the paper provides some rough empirical estimates of the size of the American middle class over the 1989–2004 period.

THE SIZE DISTRIBUTION OF INCOME DURING INFLATION

This paper analyzes the effects of inflation on the size distribution of income, making use of a microsimulation model. It goes beyond earlier analyses not only in the use of microdata but also in the types of inflation modeled. Two different income concepts are used, one the money income concept of the U.S. Census Bureau and the second, called Accrued Comprehensive Income, based on the concept of income as consumption plus the change in net worth. The results of the simulation inflations are presented graphically, as the ratio of real income with inflation to real income without, by income class. The analysis concludes that the income concept chosen is crucially important. While low income households suffer modest losses and middle income households are largely unaffected, whatever income concept is used, the effects on upper income households are extremely sensitive. With a simple money income concept, the well-to-do appear to benefit from inflation but a broader concept reverses this effect. A policy to negate the distributional effect of inflation would benefit primarily the upper income households. Similarly, macroeconomic policies designed to reduce inflation at the price of slower growth and greater unemployment would not aid lower income groups to a significant degree.