INSOLVENCY AND RISK-TAKING IN THE THRIFT INDUSTRY: IMPLICATIONS FOR THE FUTURE

This paper puts the current problems facing the thrift industry, Federal Home Loan Bank Board, and Federal Savings and Loan Insurance Corporation into historical perspective. It discusses the development of federal deposit insurance and regulation of depository institutions. The paper discusses causes of the recent financial difficulties faced by thrift institutions and the policy responses to those problems. It then examines the effect of the recent 511 thrift failures on the risk-taking behavior of institutions and the Bank Board's policy responses to risk-taking. Finally, the paper suggests possible responses to the large and growing number of insolvent institutions that have an economic incentive to pursue extremely risky portfolio opportunities.     

Quantile Autoregressive Distributed Lag Model with an Application to House Price Returns*

This article studies quantile regression in an autoregressive dynamic framework with exogenous stationary covariates. We demonstrate the potential of the quantile autoregressive distributed lag model with an application to house price returns in the United Kingdom. The results show that house price returns present a heterogeneous autoregressive behaviour across the quantiles. Real GDP growth and interest rates also have an asymmetric impact on house prices variations.     

FREE CASH FLOW (FCF), ECONOMIC VALUE ADDED (EVA™), AND NET PRESENT VALUE (NPV):. A RECONCILIATION OF VARIATIONS OF DISCOUNTED-CASH-FLOW (DCF) VALUATION

The paper assists the user of DCF methods by clearly setting forth the relationship of free-cash-flow (FCF) and economic value added (EVA?) concepts to each other and to the more traditional applications of DCF thinking. We follow others in demonstrating the equivalence between EVA and NPV, but our approach is more general in that it links the problems of security valuation, enterprise valuation, and investment project selection. Additionally, our approach relates more directly to use of standard financial accounting information. Beginning with cash budget identity, we show that the discounting of appropriately defined cash flows under the free-cash-flow valuation approach (FCF) is mathematically equivalent to the discounting of appropriately defined economic profits under the EVA? approach. The concept of net operating profit after-tax (NOPAT), found by adding after-tax interest payments to net profit after taxes, is central to both approaches, but there the computational similarities end. The FCF approach focuses on the periodic total cash flows obtained by deducting total net investment and adding net debt issuance to net operating cash flow, whereas the EVA? approach requires defining the periodic total investment in the firm. In a project valuation context, both FCF and EVA? are conceptually equivalent to NPV. Each approach necessitates a myriad of adjustments to the accounting information available for most corporations.     

Sophisticated voting and gate-keeping in the supreme court

'Sophisticated voting' has a solid theoretical foundation, butscholars have raised serious questions about its empirical importancein real-world institutions. The U.S. Supreme Court is one institutionwhere sophisticated voting should be common, but, paradoxically,where scholarly consensus about its existence has yet to emerge.We develop and test a formal model of sophisticated voting onagenda setting in the Supreme Court. Using data on petitionsfor certiorari decided in October term 1982, we show that, aboveand beyond the usual forces in case selection, justices engagein sophisticated voting, defined as looking forward to the decisionon the merits and acting with that potential outcome in mind,and do so in a wide range of circumstances. In particular, wepresent strong evidence for sophisticated behavior, rangingfrom votes to deny a case one prefers to reverse to votes togrant cases one prefers to affirm. More importantly, sophisticatedvoting makes a substantial difference in the size and contentof the Court's plenary agenda.     

The long-term impact of mergers and the emergence of a merger wave in pre-World-War I Germany

Using annual data on mergers for 35 leading German companies from 1870 to 1913, my study tries to explain the first merger wave that emerged 1898. My panel probit model that accounted for economies of scale, macroeconomic conditions, success of former mergers, and market structure revealed that previous mergers made subsequent mergers more likely. The propensity to merge was higher for larger companies that increased their market power. In the banking industry, managers imitated mergers, although these mergers were not successful, and hence followed the minimax regret principle. Rational information-based herding caused the serial dependency of mergers in other industries.     

Does the merger paradox exist even without any regulations? Evidence from Germany in the pre-1914 period

This paper measures the market response triggered by merger announcements in an environment without regulations and without a strong separation of ownership and control in Germany. Based on event study methods applied to daily data and regression analyses, I evaluate whether the merger paradox existed, and how firm size, the way of financing a merger, and industry factors influenced the success of acquirers. Hence, my study can shed some light on commonly believed explanations for the bad performance of mergers. The whole portfolio of acquirers exhibited positive cumulated abnormal returns, which indicates a rejection of the merger paradox—but market values of some companies declined. Particularly, acquiring banks lost shareholder value, although the majority of mergers occurred in the banking industry. Caused by the new exchange law, banks were in a merger wave. Therefore, alternative explanations like the minimax-regret principle might explain why banks merged in spite of lacking success.     

The Philippine Land Reform in Comparative Perspective: Some Conceptual and Methodological Implications

Using empirical evidence from the Philippine land reform (1972–2005), this paper examines land reform theory and practice, and argues that convention has a priori excluded a significant portion of actually existing land-based production and distribution relationships, while it has inadvertently included in its definition and analysis land transfers that do not constitute real redistributive reform. This problematic framing of 'exclusion–inclusion' has led to incorrect accounting and analysis of the nature, scope, pace and direction of change/reform that have occurred (or not) in the agrarian structure of a particular setting. This problem has prevented the emergence of nuanced comparative land reform studies, with possible further implications for studies that attempt to trace causal relationships between land redistribution and agrarian transformation.     

Competing for Securities Underwriting Mandates: Banking Relationships and Analyst Recommendations

We investigate whether analyst behavior influenced banks' likelihood of winning underwriting mandates for a sample of 16,625 U.S. debt and equity offerings in 1993–2002. We control for the strength of the issuer's investment banking relationships with potential competitors for the mandate, prior lending relationships, and the endogeneity of analyst behavior and the bank's decision to provide analyst coverage. Although analyst behavior was influenced by economic incentives, we find no evidence that aggressive analyst behavior increased their bank's probability of winning an underwriting mandate. The main determinant of the lead‐bank choice is the strength of prior underwriting and lending relationships.