INTRA-INDUSTRY EFFECTS OF BOND RATING ADJUSTMENTS

Several studies find that bond rating downgrades cause negative valuation effects. Other studies find that signals conveyed by earnings releases, earnings forecasts, bankruptcies, and stock offerings of individual firms can be transmitted to their corresponding industries. By combining the two sets of studies, we hypothesize that bond rating changes may contain relevant information not only about the firm, but also about the corresponding industry. We find significantly negative valuation effects for rating downgrades, which are transmitted throughout the industry. Furthermore, we find that intra-industry effects depend on particular characteristics of the bond downgrade, the downgraded firm, and industry rivals. Specifically, the negative intra-industry effects are more pronounced when (1) the downgraded firm experiences a more severe share price response to the bond rating downgrade, (2) the downgraded firm is dominant in the industry, (3) the downgraded firm is more closely related to its rivals in the industry, and (4) the downgrade is due to a deterioration in the firm's financial prospects.     

Negotiating the Evolution of the Hr Function: Practical Advice From the Health Care Sector

This paper has two aims. First, to consider explanations for the apparent gap between the paradigm of strategic human resource management on the one hand and actual HR practice on the other. Second, to generate practical advice for senior HR specialists who are aspriring to develop a strategic role for their function. the research underpinning these findings was based on case studies in three hospitals in Adelaide and a comparison of the findings with the situation at Leicester General NHS Trust where the first named author of this article was the HR director and a senior board member. the analysis reveals that specific features of each organisation's history, current structure and management, shape powerfully the nature of the HR function. Moreover, the local shaping factors define the degrees of freedom open to the HR function, so much so, that the notion that it can choose its organisational stance is here challenged.     

Wage-Tenure Contracts in a Frictional Labour Market: Firms' Strategies for Recruitment and Retention

A common assumption in equilibrium search and matching models of the labour market is that each firm posts a wage, to be paid to any worker hired. This paper considers the implications of firms posting contracts , in a random matching model with on-the-job search. More complex contracts enable firms to address both recruitment and retention problems by, for example, increasing the wage with tenure. The effect on the labour market is to reduce turnover, below the level required for efficient matching of workers to firms.     

The Market's Assessment of the Financial Services Modernization Act of 1999

We examine the impact of the events leading up to and including the passage of the Financial Services Modernization Act (FSMA) of 1999 on the stock returns of banks, brokerage firms, and insurance companies. We find that the impact is positive for all institutions. Bank gains are positively related to size and capitalization. Brokerage firms gain regardless of size, but the gains are inversely related to capitalization and insurance companies gain regardless of size or capital position. The strong positive reaction suggests that the market expects the institutions to benefit from the new opportunities created by the FSMA's passage.     

The index futures markets: Is screen trading more efficient?

This article uses a nonparametric test based on the arc‐sine law (see, e.g., Feller, 1965 ), which involves comparing the theoretical distribution implied by an intraday random walk with the empirical frequency distribution of the daily high/low times, in order to address the question of whether the abandonment of pit trading has been associated with greater market efficiency. If market inefficiencies result from flaws in the market microstructure of pit trading, they ought to have been eliminated by the introduction of screen trading. If, on the other hand, the inefficiencies are a reflection of investor psychology, they are likely to have survived, unaffected by the changeover. We focus here on four cases. Both the FTSE‐100 and CAC‐40 index futures contracts were originally traded by open outcry and have moved over to electronic trading in recent years, so that we are able to compare pricing behavior before and after the changeover. The equivalent contracts in Germany and Korea, on the other hand, have been traded electronically ever since their inception. Our results overwhelmingly reject the random‐walk hypothesis both for open‐outcry and electronic‐trading data sets, suggesting there has been no increase in efficiency as a result of the introduction of screen trading. One possible explanation consistent with our results would be that the index futures market is characterized by intraday overreaction. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:337–357, 2004     

Does an Industry Effect Exist for Initial Public Offerings?

We examine the impact of initial public offerings (IPOs) on rival firms and find that the valuation effects are insignificant. This insignificant reaction can be explained by offsetting information and competitive effects. Significant positive information effects are associated with IPOs in regulated industries and the first IPO in an industry following a period of dormancy. Significant negative competitive effects are associated with larger IPOs in competitive industries, those in relatively risky industries, those in high‐performing industries, and those in the technology sector. IPO firms that use the proceeds for debt repayment appear to represent a more significant competitive threat to rival firms relative to IPO firms that use their proceeds for other purposes.     

Free Agency and the Allocation of Labor in Major League Baseball

In this paper we examine the allocation of labor under free agency by developing and testing a model to predict the migration of free agents. Data for individual players are used in a logit model that estimates the probability that a free agent will change teams as a function of several independent variables. Along with other authors, we find that free agents tend to migrate to big cities. In addition, we find evidence that the allocation of labor may be different under free agency than under the reserve clause and suggest a reason why Coase's theorem may not be applicable to this labor market.