SEASONED EQUITY OFFERINGS FOR NEW INVESTMENT AND THE INFORMATION CONTENT OF INSIDER TRADES

Significant negative valuation effects are widely acknowledged for firms announcing seasoned equity offerings. This result is consistent with theoretical models linking new equity issues to increased adverse-selection costs, lower management ownership in the firm, misuse of free cash flow, or expectations for earnings declines. Also increasingly evident, insiders trade around corporate announcements. We test the hypothesis that insider trading and announcements of new equity issues serve as joint signals in the market's evaluation of prospective capital investment projects. Our findings are consistent with the hypothesis that insider trading is related to market reaction to announcements of new equity issues.     

Precautionary Actions within Small and Medium-Sized Enterprises

Absenteeism results in considerable costs, both for individuals, firms, and governments. One of the ways in which firms can reduce absenteeism is by taking precautionary actions, that is, improving the physical or mental working conditions of their employees. This study examines the decision-making process of small and medium-sized enterprises on whether to take precautionary actions. The main hypothesis is that firms are more likely to take precautionary actions if they assume that absence rates are related to working conditions. Several hypotheses were derived, and information on more than 600 Dutch enterprises was used to test them. The results indicate that the probability of taking precautionary actions increases with the occurrence of physical complaints, the assumed proportion of employees whose tasks are physically demanding, and firm size. The main hypothesis was, however, rejected.     

Transport subsidies, system choice, and urban sprawl

This paper analyzes the effect of transport subsidies on the spatial expansion of cities, asking whether such subsidies are a source of undesirable urban sprawl. Even though the cost-reducing effect of transport subsidies is offset by a higher general tax burden (which reduces the demand for space), the analysis shows that subsidies nevertheless lead to spatial expansion of cities. If the transport system exhibits constant returns to scale, the subsidies are inefficient, making the urban expansion they entail undesirable. The paper also studies transport “system choice,” with the city portrayed as selecting its transport system from along a continuum of money cost/time cost choices. The analysis shows that subsidies inefficiently bias choice in the direction of a high money cost/low time cost option. Lastly, the paper considers system choice in a city with rich and poor groups, showing that the rich favor a system with a high money cost and low time cost, but that their choice, if implemented, leads to a city whose spatial size is smaller than optimal. Thus, rich control of system choice does not lead to urban sprawl.     

The Effects of Cannabis Use on Wages of Prime‐age Males*

This paper uses a data set collected among inhabitants of Amsterdam, to study whether wages of prime‐age male workers are affected by cannabis use. The analysis shows that recent cannabis use has a negative effect on wages. The size of the wage effect depends on the age of onset. The earlier the start of cannabis use the larger the negative wage impact.     

Credit Constraints in Manufacturing Enterprises in Africa

We investigate the question of whether firms in Africa's manufacturingsector are credit constrained. The fact that few firms obtaincredit is not sufficient to prove constraints, since certainfirms may not have a demand for credit while others may be refusedcredit as part of profit maximising behaviour by banks. To investigatethis question, we use direct evidence on whether firms had ademand of credit and whether their demand was satisfied in theformal credit market, based on panel data on firms in the manufacturingsector from six African countries. Of those firms with a demandfor credit, only a quarter obtained a formal sector loan. Ouranalysis suggests that while banks allocate credit on the basisof expected profits, micro or small firms are much less likelyto get a loan than large firms. We also find that outstandingdebt is positively related with obtaining further lending. Therole of outstanding debt is likely to be a reflection of inefficiencyin credit markets, while the fact that size matters is consistentwith a bias as well, although we cannot totally exclude thatthey reflect transactions costs on the part of banks. We presentan analysis showing how much more profitable small firms mustbe to obtain a loan than large firms.     

A Water Bank Game with Fishy Externalities

This article describes a classroom game used in a minicourse on economics for Environmental Studies students. The game, inspired by the operation of the Idaho Water Bank and the rising importance of water rights trades in the region, features a double oral auction in which farmers sell diversion rights and hydroelectric companies buy them. The increased in-stream flows create external benefits for fly fishers, who participate in the game in later rounds. The game can illustrate the role of markets in allocating resource use rights, and the effects of external benefits, free riding, and price ceilings.     

Industrial Companies' Evaluation Criteria in New Product Development Gates

This article presents the results of a study on the evaluation criteria that companies use at several gates in the NPD process. The findings from 166 managers suggest that companies use different criteria at different NPD evaluation gates. While such criteria as technical feasibility, intuition and market potential are stressed in the early‐screening gates of the NPD process, a focus on product performance, quality, and staying within the development budget are considered of paramount importance after the product has been developed. During and after commercialization, customer acceptance and satisfaction and unit sales are primary considerations. In addition, based on the performance dimensions developed by Griffin and Page (1993), we derive patterns of use of various evaluative dimensions at the NPD gates. Our results show that while the market acceptance dimension permeates evaluation at all the gates in the NPD process, the financial dimension is especially important during the business analysis gate and after‐market launch. The product performance dimension figures strongly in the product and market testing gates. The importance of our additional set of criteria (i.e., product uniqueness, market potential, market chance, technical feasibility, and intuition) decreases as the NPD process unfolds. Overall the above pattern of dimensions' usage holds true for both countries in which we collected our data, and across firms of different sizes, holding different market share positions, with different NPD drivers, following different innovation strategies, and developing different types of new products. The results also are stable for respondents that differ in terms of expertise and functional background. The results of this study provide useful guidelines for project selection and evaluation purposes and therefore can be helpful for effective investment decision‐making at gate‐meetings and for project portfolio management. We elaborate on these guidelines for product developers and marketers wishing to employ evaluation criteria in their NPD gates, and we discuss directions for further research.     

Rich and poor before the Industrial Revolution: a comparison between Java and the Netherlands at the beginning of the 19th century

This paper examines disparities in the level of economic development at the beginning of the 19th century, comparing between the Netherlands and Java. A detailed reconstruction of GDP and purchasing power parities shows that before the Industrial Revolution Java’s GDP per capita was about a third of the level of the Netherlands, confirming Angus Maddison’s estimates. Disparities in real wages were much smaller, however, for skilled laborers real wages on Java were higher than in the Netherlands. This paradox arises because the structure of the economy and the distribution of income of both countries was very different.