Balance Sheet Restructuring and Investment

Abstract
This article looks at the evolution of corporate balance sheets and investment over the past few years .
We find that many companies have significantly improved their balance sheets in this time. Leverage has been reduced, and this, coupled with lower nominal interest rates, has improved the interest cover and cash flows of the corporate sector. For many firms, the process of balance sheet repair has proceeded a long way so that the extent to which the financial position of firms will impinge on investment is much lower than it was a few years ago.
Looking further ahead, it appears that the rate of return to investing in capital is relatively high, at least when judged against the standards of earlier downturns. With the recovery picking up pace we should, therefore, see firms more inclined to expand their capital expenditure and less focused on financial restructuring.     

Induced innovation and marginal cost of new technology

Lacking data on development and implementation costs for input-saving technologies, we develop a nonparametric procedure to estimate relative differences in marginal technology costs for technical change to be consistent with the induced innovation hypothesis. We apply it to U.S. agriculture.     

SAILING THROUGH THIS STORM? CAPITAL FLOWS IN ASIA DURING THE CRISIS

The 2007–2009 crisis has led to an unprecedented collapse in international capital flows. Asian economies were, however, relatively unaffected: the contraction in their capital flows was limited to the most acute phase of the crisis in late 2008, followed by a rapid rebound. We show that this reflects both Asia's structural characteristics, such as limited reliance on international banking, and Asian specificities in the form of a limited impact of international bank exposure on capital flows. We also find evidence of a connection between the use of reserves and variations in net private capital inflows.     

Good News and Bad News: Search from Unknown Wage Offer Distributions

The largest market in national economies is the labor market. Labor market contracting is characterized by job search, often from unknown wage offer distributions. This paper reports experimental tests of finite horizon models of job search in which the wage offer distribution is unknown. Theoretically-optimal search from an unknown wage offer distribution can have the seemingly paradoxical property that some offers will be accepted that are lower than other offers that will be rejected in the same period of the search horizon. Thus the reservation wage property (or lowest acceptable wage path) may not exist. This can occur because an offer that is a priori relatively high (good news) can imply that it is highly probable that search is from a favorable distribution, and such an offer can look unattractive when it is an a posteriori relatively low offer from a favorable distribution (bad news). This paper reports results from experimental treatments for search from unknown distributions in which the reservation wage property does exist and treatments in which it does not exist. We find that the consistency of search behavior with search theory reported in earlier papers is robust to the presence or absence of the reservation wage property and to whether the draws come from known or unknown distributions.     

The role of capital investment project teams in organisational learning

The management and organisation of capital projects in the British National Health Service (NHS) is dependent upon project teams. An analysis of four case studies shows how these teams also act as agents of learning for individuals and the organisation. This article considers the process by which learning came about. In particular it identifies the ability of the project teams to develop a parallel organisation within a wider organisational context. These teams develop specific rules, roles and relationships which help individual project team members to more effectively share their knowledge with others and their organisation.