A Markov switching analysis of contagion in the EMS

This paper applies the multivariate version of the Forbes and Rigobon (2002) contagion test, as proposed by Dungey et al. (2005a), to detect contagion effects in the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS). Crisis and non-crisis observations are determined endogenously via a Markov-switching vector autoregression (MSVAR). We show that the MSVAR is suitable for this purpose, as it does particularly well in identifying the 11 realignments of the ERM. We examine whether Denmark’s rejection of the Maastricht Treaty and Italy’s competitiveness problems affected other EMS participants and find evidence for contagion.     

The argument for more future-oriented planning

Planning, and practically all forms of decisionmaking, are concerned with the future. The future, unless we adopt deterministic philosophies, is uncertain and therefore difficult to plan for. Through the processes of change it is likely to be different from the past; existing and past knowledge and experience are only a partial guide to decisionmaking. The inclusion of a future dimension based on careful thought about possible future development offers a new tool to the decisionmaker that should not be overlooked.     

Employee Stock Options, Corporate Taxes, and Debt Policy

We find that employee stock option deductions lead to large aggregate tax savings for Nasdaq 100 and S&P 100 firms and also affect corporate marginal tax rates. For Nasdaq firms, including the effect of options reduces the estimated median marginal tax rate from 31% to 5%. For S&P firms, in contrast, option deductions do not affect marginal tax rates to a large degree. Our evidence suggests that option deductions are important nondebt tax shields and that option deductions substitute for interest deductions in corporate capital structure decisions, explaining in part why some firms use so little debt.     

The leader as lobbyist

Guidant's Ginger Graham argues that senior executives are actually better prepared than most lobbyists to inform and educate members of Congress about the issues that will affect their businesses.     

Does Corporate Diversification Destroy Value?

We analyze several hundred firms that expand via acquisition and/or increase their number of business segments. The combined market reaction to acquisition announcements is positive but acquiring firm excess values decline after the diversifying event. Much of the excess value reduction occurs because our sample firms acquire already discounted business units, and not because diversifying destroys value. This implies that the standard assumption that conglomerate divisions can be benchmarked to typical stand-alone firms should be carefully reconsidered. We also show that excess value does not decline when firms increase their number of business segments because of pure reporting changes.     

Debt, Leases, Taxes, and the Endogeneity of Corporate Tax Status

We provide evidence that corporate tax status is endogenous to financing decisions, which induces a spurious relation between measures of financial policy and many commonly used tax proxies. Using a forward-looking estimate of before-financing corporate marginal tax rates, we document a negative relation between operating leases and tax rates, and a positive relation between debt levels and tax rates. This is the first unambiguous evidence supporting the hypothesis that low tax rate firms lease more, and have lower debt levels, than high tax rate firms.     

The Nature of Business Planning Undertaken by General Practitioner Fundholding Practices in the North West Region

This article focuses on a central feature of the former Conservative Government's approach to the National Health Service (NHS), the introduction of General Practitioner Fundholding. It examines the nature of business planning undertaken by fundholding practices in the North West Region by looking at the participation of various stakeholders in the business planning process, the business planning techniques adopted and the extent to which fundholding practices set and monitor their objectives.     

Do Price Discreteness and Transactions Costs Affect Stock Returns? Comparing Ex‐Dividend Pricing before and after Decimalization

By the end of January 2001, all NYSE stocks had converted their price quotations from 1/8s and 1/16s to decimals. This study examines the effect of this change in price quotations on ex‐dividend day activity. We find that abnormal ex‐dividend day returns increase in the 1/16 and decimal pricing eras, relative to the 1/8 era, which is inconsistent with microstructure explanations of ex‐day price movements. We also find that abnormal returns increase in conjunction with a May 1997 reduction in the capital gains tax rate, as they should if relative taxation of dividends and capital gains affects ex‐day pricing.     

Party realignments and the growth of federal economic regulation, 1861–1986

This article explains when and why the federal government passed laws with the intended goal of maintaining or improving a particular industry or segment of an industry. The adoption of regulatory laws across time will be described, and the surges and declines in the distribution explained. The empirical analysis covers the years 1861–1986.This article is an abbreviated version of a paper prepared for the 1988 Conference Perspectives on Banking Regulation, Federal Reserve Bank of Cleveland, November 3–4, 1988. I am very indebted to George J. Benston who allowed me to revise the paper in response to his criticisms.     

Non-Governmental Organizations, Shareholder Activism, and Socially Responsible Investments: Ethical, Strategic, and Governance Implications

In this article, we document the growing influence of non-governmental organizations (NGOs) in the realm of socially responsible investing (SRI). Drawing from ethical and economic perspectives on stakeholder management and agency theory, we develop a framework to understand how and when NGOs will be most influential in shaping the ethical and social responsibility orientations of business using the emergence of SRI as the primary influencing vehicle. We find that NGOs have opportunities to influence corporate conduct via direct, indirect, and interactive influences on the investment community, and that the overall influence of NGOs as major actors in socially responsible investment is growing, with attendant consequences for corporate strategy, governance, and social performance.