Endogenous leverage and expected stock returns

This note clarifies conditions under which endogenous choice of debt induces a negative relation between leverage or default risk and expected stock returns. In the context of the model of George and Hwang [2009. Journal of Financial Economics 96, 56–79], we correct the contention that variation in bankruptcy costs across firms is sufficient. Variation in asset risk parameters can lead to the desired relation, but may not when also controlling for variation in book-to-market ratios. A simple parameterization of cross-sectional heterogeneity in risk and profitability implies a negative association of expected return with leverage and distress risk and a positive association with book-to-market.     

Meta-analysis in model implementation: choice sets and the valuation of air quality improvements

This research illustrates how the methods developed for meta-analysis can serve to document and summarize voluminous information derived from repeated sensitivity analyses. Our application is to the sensitivity of welfare estimates derived from discrete choice models to assumptions about the choice set. These assumptions affect welfare estimates through both the estimated parameters of the model and, conditional on the parameters, the substitution among alternatives. In our specific application, the evaluation is in terms of estimated benefits of air quality improvements in Los Angeles based on discrete choices of neighborhood and housing. Copyright © 2007 John Wiley & Sons, Ltd.     

Borrowed reserves and deposit variation: The risks to monetary policy

A theory of bank reserves is presented with emphasis on the behavior of borrowed reserves, the Federal Reserve's operating instrument. The theory explains the observed nonlinear relationship between borrowing and the spread between the federal funds rate and the discount rate. The theory shows that borrowed reserves are also a function of deposit variation. A shift in bankers' perceptions of deposit variation can cause borrowed reserves demand to shift so that the level of borrowing is not a reliable indicator of the degree of reserve pressure. Since borrowed reserves are used as the Federal Reserve's operating instrument, problems such as these pose substantial risks to the implementation of monetary policy.     

Keiretsu and Relationship‐Specific Investment: A Barrier To Trade?

This article develops a model of informal procurement within Japanese keiretsu so as to consider effects on intermediate-good imports, such as auto parts. Parts-suppliers make relationship-specific investments that benefit the automaker and prices are determined by bargaining after investment has been sunk. Although this investment raises efficiency, it limits the range of imports to less important parts, such as tailpipes, and it is possible that no parts are imported, despite lower foreign costs. Lack of information concerning investment rents combined with counterintuitive responses of imports to changes in output and costs could create unwarranted perceptions of a trade barrier.     

Principles involving marketing policies: An empirical assessment

We examined nine marketing textbooks, published since 1927, to see if they contained useful marketing principles. Four doctoral students found 566 normative statements about pricing, product, place, or promotion in these texts. None of these statements were supported by empirical evidence. Four raters agreed on only twenty of these 566 statements as providing meaningful principles. Twenty marketing professors rated whether the twenty meaningful principles were correct, supported by empirical evidence, useful, or surprising. None met all the criteria. Nine were judged to be nearly as correct when their wording was reversed.The authors thank the many people who commented on early drafts, including Eileen Bridges, Fred Collopy, Douglas Dalrymple, Alan Dubinsky, Andrew Ehrenberg, Jonathan Freeman, Raymond Hubbard, William Perreault, William Ross, Steven Schnaars, and Gerald Zaltman. Jennifer L. Armstrong, Gina Bloom, and Phan Lam provided editorial assistance.     

Firms' knowledge‐sharing strategies in the global innovation system: empirical evidence from the flat panel display industry

This paper explores the relationship between firms' strategies to share knowledge with their innovation system and innovative performance. The empirical analysis showed that many firms designed strategies to share technological knowledge with competitors, and those firms that shared knowledge with their innovation system earned higher innovative performance than firms that did not share knowledge. In addition, firms that interacted with their global innovation system earned higher innovative performance than firms that interacted with only their national innovation system. These results should help managers and researchers understand how to devise technology strategies in globally integrated industries. Copyright © 2003 John Wiley & Sons, Ltd.     

Mapping the Ethicality of Algorithmic Pricing: A Review of Dynamic and Personalized Pricing

Journal of Business Ethics - Firms increasingly deploy algorithmic pricing approaches to determine what to charge for their goods and services. Algorithmic pricing can discriminate prices both...     

Do Households Prefer Small School Districts? A Natural Experiment

Some education reformers have proposed breaking up large urban school districts, thereby moving to a more efficient scale, increasing school choices, and promoting school competition. This article tests whether households expect these effects and whether they value them. It considers the effect on real estate prices of the surprise breakup of the Los Angeles Unified School District (LAUSD) into 11 minidistricts in April 2000. We estimate households' reaction to this reform in a difference‐in‐differences setting that controls for any unobserved spatial effects unaffected by the announcement. We find that households valued this decentralization, with a 2–3 percentage point increase in housing values in the LAUSD area over pre‐existing trends, compared with control districts. The effect is highest in wealthier neighborhoods but otherwise homogenous within the LAUSD area. The results suggest that households believe that decentralization would make schools more effective and that they respond to signals about schools' future.