The Development of Secondary Market Liquidity for NYSE-Listed IPOs

For NYSE‐listed IPOs, limit order submissions and depth relative to volume are unusually low on the first trading day. Initial buy‐side liquidity is higher for IPOs with high‐quality underwriters, large syndicates, low insider sales, and high premarket demand, while sell‐side liquidity is higher for IPOs that represent a large fraction of outstanding shares and have low premarket demand. Our results suggest that uncertainty and offer design affect initial liquidity, though order flow stabilizes quickly. We also find that submission strategies are influenced by expected underwriter stabilization and preopening order flow contains information about both initial prices and subsequent returns.     

OVERHEAD COST ALLOCATION IN AUSTRALIAN MANUFACTURING COMPANIES

Cost and management accounting practices are being criticised for their deficiencies in providing firms with high-quality information for decisionmaking. While empirical data exist for overseas countries, little information, if any, is available for Australian companies. This paper reports the results of a survey addressed in November 1989 to the 2,000 largest Australian manufacturing companies. A contingency approach (using firm size, diversification, decentralisation, international exposure and industry as contingent variables) is suggested to explain various cost-allocation practices. Responses from 430 firms provided the information used in this study.     

Financial Development,Credit, and Business Cycles

How does financial development affect the magnitude of the business cycles fluctuations? We examine this question in a general equilibrium model with heterogeneous agents and endogenous credit constraints based on Kiyotaki (1998). We show that there is a hump‐shaped relationship between the degree of financial frictions and the amplification of unexpected productivity shocks. This nonmonotonic relation is due to the fall in financial frictions having two opposite effects on the response of output. One effect is the reallocation of productive inputs between agent types, which, while active, increases with the fall in financial frictions. The other effect is the change in the demand of inputs, which decreases with the fall in financial frictions. At low levels of financial development, the reallocation effect dominates and a fall in financial frictions increases the amplification of productivity shocks. In contrast, at higher levels of financial development, a fall in financial frictions decreases the shock amplification because the reallocation effect disappears while the effect on the demand of inputs is still present.     

On the Impact of Innovation on the Marginal Abatement Cost Curve

When modeling the effects of innovation on the marginal abatement cost (MAC) curve, many studies in environmental economics have posited, implicitly or explicitly, a uniform downward shift. The purpose of this paper is to thoroughly investigate this claim in a simple theoretical framework by introducing innovation in the production function of a price‐taking, polluting firm in four economically meaningful ways. We establish that the effects of innovation on the MAC curve depend critically on the specific type of innovation, and that only innovation in end‐of‐pipe technology leads to a uniform downward shift of the MAC curve. A second class of results points to the fact that for other types of innovation in the overall production process, the scope for an upward shift of the MAC curve in response to innovation is easier to justify theoretically. These results call for a re‐appraisal of various results in environmental policy obtained in theoretical work relying on this postulate.     

Weak Moral Motivation Leads to the Decline of Voluntary Contributions

We develop a model that accounts for the decay of the average contribution observed in experiments on voluntary contributions to a public good. The novel idea is that people's moral motivation is “weak.” Their judgment about the right contribution depends on observed contributions by group members and on an intrinsic “moral ideal.” We show that the assumption of weakly morally motivated agents leads to the decline of the average contribution over time. The model is compatible with persistence of overcontributions, variability of contributions (across and within individuals), the “restart effect” and the observation that the decay in contributions is slower in longer games. Furthermore, it offers a rationale for conditional cooperation.     

Help the Low Skilled or Let the Hardworking Thrive? A Study of Fairness in Optimal Income Taxation

In a model where agents have unequal wages and heterogeneous preferences, we study the optimal redistribution via an income tax, when the social objective is based on a combination of efficiency and fairness principles, and when incentive issues are taken into account. We show how some fairness principles entail specific features for the optimal taxes, such as progressivity or tax exemption for incomes below the minimum wage.     

THE ECONOMIC EVALUATION OF A JOINT SUPPLY CHAIN INNOVATION

In this paper we discuss the economic evaluation of a supply chain innovation. We look at a situation in which a single manufacturer and a single distributor consider relocating assets and reengineering processes, in order to reduce total assets and total costs in the supply chain. The selling price between the manufacturer and distributor needs to be adjusted to reflect the new costs and asset levels. We investigate the price adjustment needed to maintain the ROA (Return on Assets) of both companies and to yield a nonnegative NPV (Net Present Value) for both companies. We identify conditions under which ROA and NPV yield the same results, such as the absence of implementation costs. We also demonstrate that the minimum price required by the manufacturer may lie above the maximum price acceptable for the distributor. Then the price range is empty and companies will not be able to find a price adjustment that results in a nonnegative NPV and nondecreasing ROAs for both companies.     

THE STRATEGIC TIMING OF DIRECT DEMOCRACY

This paper focuses on the strategic timing of elections by agenda-setters in direct democracy settings. Because concurrent elections affect turnout, scheduling referenda for different elections will produce different median voters. I hypothesize that agenda-setters with power over the timing of a referendum will schedule the referendum in conjunction with the other set of races that produce a policy closest to their preferred outcome. Consistent with the theory, I show that Wisconsin school boards' use of special elections for school referenda are related to differences in the revealed preferences of voters in low- and high-turnout elections.