EVIDENCE ON THE ROLE OF TAXES ON FINANCING CHOICE: CONSIDERATION OF MANDATORILY REDEEMABLE PREFERRED STOCK

In this study we examine the effect of firms' marginal tax rates on incremental and overall reliance on mandatorily redeemable preferred stock (MRPS). Similarities in the cash flows associated with debt and MRPS, as well as similarities in the claims of holders of debt and MRPS on the assets of issuing firms, suggest that MRPS may be viewed as a substitute for debt. However, important differences in the tax treatment of MRPS and debt suggest that firms that cannot make full use of interest tax shields may be able to finance more efficiently using MRPS instead of debt. The results indicate that, both incrementally and overall, firms with low marginal tax rates rely more heavily on MRPS than debt relative to firms with high tax rates. This finding is consistent with the proposition that firms that cannot make full use of interest tax shields finance incrementally using equity rather than debt.     

The Family as Stakeholder

This article argues that if stakeholding has any validity, then the family should be numbered among the stakeholders. It then goes on to discuss how the family's stake in the firm could be distinguished from its stake in society and suggests ways in which the family's stake could be embodied.     

Saying it like it isn't: The pros and cons of 360-degree feedback

In corporate America, the use of 360-degree feedback continues to rise. Is this tool, though, all it purports to be? Used with caution, the feedback process can provide meaningful information for both the organization and the individuals involved. Misuse of the process, however, can lead to hurt feelings, increased anxiety, and even loss of key personnel. This small case study showcases key research findings on best practices for using the 360-design feedback process, especially regarding intended use of feedback, aligning performance measures with organizational goals, and selecting and training participants.     

Toward a telework taxonomy and test for suitability: A synthesis of the literature

The current merging of computer and communications technologies is facilitating the trend towardtelework-remote work arrangements enabled by information technology. Organizations today have ever increasing options in the management and distribution of their work processes. In this study, we review the research on telework conducted in the United States, Western Europe, and Japan. We then propose a taxonomy for classifying different types of telework. Using this taxonomy, we examine the spatial, coordination, and temporal structures of different types of telework.Previous research results indicate that the introduction of telework is a complex process and has profound implications for the organization. However, this research critically lacks any guidance for the decision maker in determining the feasibility of implementing telework. We propose a framework for a telework suitability test to determine the appropriateness of telework, in a particular situation. This telework suitability test integrates existing research findings with future research areas.     

The effect of differential shift costs on capital utilization

This paper presents the results of a micro study of the influence of the shift differential factor on utilization rates in Kenyan manufacturing. Qualitative information about the nature of technology and of shift differentials is incorporated into models of the choice of utilization rate under the alternative assumptions of constant returns to scale and increasing returns to scale. Econometric tests are then used to show that 1971 data is consistent with the theoretical predictions, although the results suggest that the quantitative significance of the shift differential factor in causing excess capacity should not be overstated.     

A tax-based motive for the underpricing of initial public offerings

This paper presents a model of entrepreneurial wealth maximization for the pricing of initial public offerings (IPOs). It is an extension of one previously presented in the literature. The model shows that personal tax rates on ordinary income and capital gains may, in part, determine IPO pricing: an increase in the capital gains tax rate should lower the degree of underpricing. An empirical analysis of the effect of the Tax Reform Act of 1986, which raised the capital gains tax rate, shows that the average degree of underpricing did decrease as predicted, and that this occurs after controlling for other possible influences.