THE CAPITAL STRUCTURE PUZZLE: ANOTHER LOOK AT THE EVIDENCE

Since the formulation of the M & M irrelevance propositions 40 years ago, financial economists have been debating whether there is such a thing as optimal capital structure—a proportion of debt to equity that maximizes current firm value. Some finance scholars have followed M & M by arguing that both capital structure and dividend policy are largely “irrelevant” in the sense that they have no significant, predictable effects on corporate market values. Another school of thought holds that corporate financing choices reflect an attempt by corporate managers to balance the tax shields and disciplinary benefits of greater debt against the increased probability and costs of financial distress. Yet another theory says that companies do not have capital structure targets, but instead follow a financial pecking order in which retained earnings are preferred to outside financing, and debt is preferred to equity when outside funding is required. In reviewing the evidence that has accumulated since M & M, the authors argue that taxes, bankruptcy (and other “contracting”) costs, and information costs (the main factor in the pecking order theory) all appear to play an important role in corporate financing decisions. While much if not most of the evidence is consistent with the argument that companies set target leverage ratios, there is also considerable support for the pecking order theory's contention that firms are willing to deviate widely from their targets for long periods of time. According to the authors, the key to reconciling the different theories—and thus to solving the capital structure puzzle—lies in achieving a better understanding of the relation between corporate financing stocks (leverage ratios) and flows (specific choices between debt and equity). Even if companies have target leverage ratios, there will be an optimal deviation from those targets—one that will depend on the transactions and information costs associated with adjusting back to the target relative to the costs of deviating from the target. As the authors argue in closing, a complete theory of capital structure must take account of these adjustment costs and how they affect expected deviations from the target.     

The changing economic status of U.S. disabled men: Trends and their determinants, 1982–1991

We track the level of economic well-being of the population of men who began receiving Social Security Disability Insurance benefits in 1980–81 from the time just after they became beneficiaries (in 1982) to 1991. We present measures of the economic well-being of disabled individuals and their nondisabled peers as indicators of the relative economic position of these two groups. These measures also provide an intertemporal comparison of well-being and hardship as disabled persons and their nondisabled peers age and retire. We first show several economic well-being indicators for new male recipients of disability benefits in 1982 and 1991. We then compare their economic position to that of a matched group of nondisabled males with sufficient work histories to have been disability-insured. Because labor market changes over this decade have led to a relative deterioration in the position of younger and less-educated workers, we compare men with disabilities to those without disabilities and distinguish different age and educational levels within the groups. We conclude by assessing the antipoverty effectiveness of Social Security income support for both younger and older male SSDI recipients. First version received: May 1998/final version received: July 1999     

Consumers' perceptions of promotional framing of price

This article focuses on consumer perceptions of transaction value when presented with deals that are equivalent on a unit‐cost basis but worded differently. Through an experimental design setting, it examines the effect of three such frames: one, stated in terms of a straight price promotion (“50% off”), the second, as an extra‐product or volume promotion (“buy one, get one free”), and a third as a “mixed” promotion (“buy two, get 50% off”). Four typical supermarket categories are considered which permit the investigation of the effect of two category‐based moderating factors: stock‐up characteristic and price level. Results show that the nature of framing appears to differentially affect consumer perceptions of value from “equivalent” deals. Also, perceptions of deal value from price versus extra‐product promotions are moderated by the stock‐up characteristic of the category. However, consumers' internal reference prices remain unaffected across one‐time price and extra‐product promotions. These findings provide some understanding of the role of deal framing on consumers' responses, and offer implications for industry practitioners interested in communicating the maximum value in their deals. © 2000 John Wiley & Sons, Inc.     

‘The Magnificent 7[am]?’ Work‐life articulation beyond the 9[am] to 5[pm] ‘norm’

This article focuses on the work‐life ‘balance’ challenges of those who work in organisations that operate beyond standard hours. The concept of work‐life articulation is utilised to examine the experiences and practicalities of attempting to reconcile the, often competing, demands of employment and family life. Qualitative research was conducted in two private sector businesses and one‐third sector organisation in the UK during the onset of the 2008 financial crisis. The findings reveal increasing competitive pressures, efficiency drives and work intensification. ‘Business needs’ are prioritised over care responsibilities, and in the private sector organisations there is declining flexible working with a reassertion of the management prerogative. This article contributes to current debates over work‐life ‘balance’ and highlights variable, changeable and unpredictable working time arrangements that permeate non‐standard hours, which creates additional complexities and challenges for family time schedules and routines.     

THE CONCENTRATION OF PERSONAL WEALTH IN AMERICA, 1969

This essay focuses on the problems of estimating the share of America's personal wealth in the hands of affluent individuals by a technique known as the estate multiplier method. Rather than exploring these problems in an empirical vacuum, we first present some results from the most recent estimates of the distribution of U.S. personal wealth.¹ The estimates—for the year 1969—are then used as a basis for gauging the sensitivity of estate multiplier estimates to variations in approach.
Section I presents new empirical findings dealing with the asset holdings of top wealth-holders and the super rich, and with the shares of specific assets owned by them. Also presented is information about the sex and marital status of the super rich.
Section II discusses various technical aspects of the estate multiplier as applied to federal estate tax returns. The main concern is with the weighting process, but attention is paid to the fact that estate tax returns filed in a given year are not for decedents who died in that year or any single year, and to the problems of adjusting the face value of life insurance to cash surrender value.