How a Reduction of Standard Working Hours Affects Employment Dynamics

December 1, 1996 a new law was implemented in Portugal to gradually reduce the standard workweek from 44 to 40 h. We study how this mandatory reduction affected employment through job creation and job destruction. There was considerable regional, sectoral and firm-size variation in the share of workers who were affected by the working hours reduction. We exploit this variation to assess the impact of the workweek reduction. We find evidence that the working hours reduction had a positive effect on employment through a fall in job destruction.     

Migrate or not? The effects of regulation SHO on options trading activities

In this study, we investigate the effects of stock short-sale constraints on options trading by exploiting two US Securities and Exchange Commission rule changes under Regulation SHO: Rule 203 (locate and close-out requirements) and Rule 202T (temporary removal of short-sale price tests). We find that stock short selling activities decrease (increase) significantly after Rule 203 (Rule 202T) implementation, supporting the validity of Rule 203 (Rule 202T) as an exogenous increase (decrease) in short-sale constraints. Options volume increases significantly after Rule 203 went into effect and the result is more pronounced among firms with lower levels of institutional ownership and smaller options bid-ask spreads. Therefore, the evidence from Rule 203 suggests that investors may use options as substitutes for stock short sales when short selling is less feasible or more costly due to the locate and delivery requirements. In contrast, we find no significant change in the options trading volume of pilot stocks during the pilot program of Rule 202T. Overall, our results indicate that the impact of short-sale constraints on options trading varies with the types of constraints affected.     

Short and long-term interactions between venture capital returns and the macroeconomy: evidence for the United States

The main purpose of this paper is to empirically model the influence of macroeconomic and financial variables on the performance of risk capital in the US. We start our investigation using a static long-run equilibrium model. In contrast to previous studies, we analyze the effect of several factors simultaneously within the framework of a vector error correction model (VECM). This allows us to study short- and long-term interactions to overcome the problem of endogeneity, and to discover causal mechanisms. The results show that the value of venture capital investments is positively related to industrial production, the exit channel Nasdaq, and the long-term interest rate. However, the value of venture capital investments is negatively related to the short-term interest rate. According to the short-term dynamics, VEC Granger causality confirms that only industrial production influences venture capital performance, while venture capital returns Granger causes Nasdaq performance.     

Are Investment Banks Special Too? Evidence on Relationship‐Specific Capital in Investment Bank Services

The question of whether optimal provision of these services comes mainly from established relationships between banks and client firms or can result from arms'‐length market transactions has been the topic of considerable recent debate. This discussion has paralleled the debate in the commercial banking literature on the “specialness” of banks and whether lending can and should be relational or purely transactional. Whether the provision of investment bank services is relationship‐based or transactional is especially relevant now thanks to recent trends that have blurred the distinction between commercial and investment banks, and changed the competitive landscape for investment bank services. In their study summarized in this article, the authors examine whether investment bank‐client relationships create valuable relationship‐specific capital using stock market evidence from the period surrounding the collapse of Lehman Brothers. Specifically, they studied the effect of the Lehman collapse on companies that used Lehman for (1) underwriting equity offerings, (2) underwriting debt offerings, (3) advice on mergers and acquisitions, (4) analyst research services, and (5) market‐making services. The study addressed two specific questions. First, which investment bank services, if any, are associated with the creation of relationship‐specific capital; and second, what are the value drivers of this relationship capital? The authors report finding that companies that used Lehman as lead underwriter for public equity offerings experienced significantly negative abnormal stock returns in the days surrounding Lehman's bankruptcy announcement. By contrast, they find no significant reaction to the announcement for Lehman's debt underwriting clients or any of the other client categories they examine. While most of these investment bank services have at least the potential to create relationship‐specific capital, the authors' findings suggest that except for equity underwriting, all the other investment bank services appear to be transactional rather than relationship‐based, at least in the average case. Moreover, the authors report significant differences even among different groups of Lehman's equity underwriting clients. An equity underwriting relationship with Lehman appears to have been especially valuable for smaller, younger, and more financially constrained firms—those firms which presumably had a high degree of dependence on Lehman to access the capital market.     

Capital expenditure decision making in small firms

A number of studies have been conducted to determine the extent to which large firms utilize sophisticated techniques in capital expenditure decision making. This research effort focuses on financial decision making procedures of small firms, exploring the techniques utilized to evaluate investment opportunities, methods employed to adjust for risk, purposes of expenditures and concern for profitability, and the source and cost of funds. In light of the recent debate on the capital shortage issue, small firms were also asked what type of tax reform they deemed most desirable to stimulate capital investments.     

Structural constraints on organizational change: A longitudinal analysis

The results of a longitudinal study assessing the impact of internal constraints upon both organizational responsiveness to the environment and efforts to change structures for symbolic signaling of policy are presented. The causal model used is developed from a theoretical elaboration of Williamson, Thompson, and Meyer. The implications of the analysis for the signaling metaphor of organizational change are emphasized. The data indicate (i) that the varying resistance to change observed within core dimensions of organizational structure may be largely due to durable capital investments, (ii) that within capitalized dimensions of organizational structure, the resulting resistance to change leads to a longitudinal persistence of centralized decision making, and (iii) that failure to incorporate such constraints in analyses of organizational change leads to misleading results.