The capital structure puzzle revisited

Corporate finance researchers have long been puzzled by lowcorporate debt ratios given debt's corporate tax advantage.This article recognizes that firm value typically reflects agrowing stream of earnings, while current debt reflects a nongrowingstream of interest payments. Debt to value is therefore a distortedmeasure of corporate tax shielding. Even with very small debt-relatedcosts, this may explain the observed magnitude and cross-sectionalvariation of debt ratios. Since this variation may be independentof tax shielding, debt ratios provide an inappropriate frameworkfor empirically examining the trade-off theory of capital structure.     

Trading volume with private valuation: evidence from the ex-dividend day

We test a theory of the interaction between investors' heterogeneity,risk, transaction costs, and trading volume. We take advantageof the specific nature of trading motives around the distributionof cash dividends, namely the costly trading of tax shields.Consistent with the theory, we show that when trades occur becauseof differential valuation of cash flows, an increase in riskor transaction costs reduces volume. We also show that the nonsystematicrisk plays a significant role in determining the volume of trade.Finally, we demonstrate that trading volume is positively relatedto the degree of heterogeneity and the incentives of the variousgroups to engage in trading.     

The self-enforcing provisions of oil and gas unit operating agreements: theory and evidence

This article extends the existing theory and empirical investigationof unitization contracts. It highlights the importance of incentive-compatibilityand self-enforcement and the bargaining problems faced in achievingviable, long-term contracts. We argue that only if the partiesto a unitization contract have unit production shares that arethe same as their cost shares will the contract be incentivecompatible. Using a database of 60 unit operating agreements,we measure the industry's actual behavior against the principlesof production from a common pool. Our survey of units that haveonly one production phase and that are relatively homogeneousreveals that such equal sharing rules are always found and theyappear to encourage the parties to behave optimally. In morecomplex units with multiple production phases and/or separateconcentrations of oil and gas (gas caps) we find deviationsfrom the theoretical ideal. In the case of multiphase units,we find equal cost and production shares within phases, butnot across phases. A preset trigger for shifting from one productionphase to the next helps to maintain optimal behavior. For gascap units, however, we generally do not find the equal sharingrule. Conflicts and rent dissipation follow as illustrated bythe case of the Prudhoe Bay Unit. The article describes thedesirable contract rules for avoiding moral hazard. It alsoshows how the effects of those rules can be replicated in difficultsituations.     

Prices, liquidity, and the information content of trades

We investigate the effect of asymmetric information on pricesand liquidity by analyzing trades, quotes, spreads, and depths.Information content should increase with trade size and theinformation asymmetry of the trading period. Results show thatprice and liquidity effects are significantly associated withinformation content as measured by both trade size and timingrelative to information events. Results are stronger for purchasesthan sales. Quoted prices are better measures of informationeffects than transaction prices, because they control for bid-askbounce. Finally, trades that a priori contain no informationhave no impact on prices and liquidity, despite their largesize.     

HAYEKIAN ECONOMIC INFRASTRUCTURE AS A FOUNDATION FOR SUSTAINED PROSPERITY

Rather than debate whether technical advances have created a ‘new economy’, economists should focus on the more interesting and useful question: How do we create the sort of environment in which innovation and the productive use of new technology thrive, thereby creating economic prosperity? Such an environment is the product of government laying the appropriate infrastructure, manifested in the culture of the institutions it supports. This article discusses the features governments must incorporate into their institutions in order to build an economic infrastructure that promotes prosperity.     

Measurement effects and the variance of returns after stock splits and stock dividends

This article examines the relation between two factors affectingstock returns, the bid-ask spread and price discreteness, andthe increase in return variance after ex-dates of stock splitsand stock dividends. Controlling for these effects, the varianceof daily returns still increases significantly. The varianceof weekly returns also increases significantly, and the varianceof returns for a control sample of nonsplitting firms showsno significant increase. Variance ratio tests show that bid-askerrors are small for these stocks and therefore cannot explainthe large increase in variance. Spreads and price discretenessdo not explain increased variance after stock distributions.     

Re-enactment Events and Tourism: Meaning,Authenticity and Identity

Re-enactment events have began to play a significant role in the calendars of individual attractions, regions or even nations to generate media exposure, develop inbound tourism activity and raise the cultural heritage profile of a locality for community development and/or regeneration purposes. The (re-)presentation of cultural heritage in these forms creates a unique set of interactions between landscapes, local communities, tourists and heritage organisations. In the recent past however, re-enactment events have been subjected to increased debate and criticism as to their educational value and meaning and for their contribution to understandings of cultural heritage in post-modern consumer societies. This paper presents an interdisciplinary review of these debates and draws on small scale research findings to reassess the value of re-enactment events as a means of presenting heritage to audiences. The paper argues that re-enacted historical events achieve a range of purposes and provides examples of evidence from a range of differing perspectives including: public policy and event organisers; re-enactors and academics in the field. It argues that the professional heritage industry, tourists, and re-enactors all contribute to making such events meaningful and as such they represent unique frames through which to understand issues of authenticity and identity in the production and consumption of post-modern cultural heritage attractions.     

Nutrition and the fertility of younger women in Kinshasa,Zaire

This paper examines the relationship between various measures of household nutrition and fertility in Zaire (where malnutrition is rampant), in particular, the total effect of these nutrition measures on the length of time between births when infant mortality rates are held constant. Closed birth intervals (including average birth interval and length of 1st and 2nd closed birth intervals) and probability of occurrence of 2nd birth after the 1st birth, whether or not the 2nd birth occurred before the survey date, are examined to provide support to the hypothesis that there is a negative relationship between calorie consumption and interval between births. Data used for analysis are households (taken from the 1969 Socio-Economic Survey of Kinshasa) headed by a man with only 1 wife (aged 20-24 years at survey date). The main policy implication of the study is that rises in calorie consumption associated with the early stages of modernization may be expected to increase fertility in noncontracepting populations if there is no change in infant mortality rates. If infant mortlaity declines, the total effect of an increase in calorie consumption on the fertility of women is ambiguous. Another implication is that if calorie consumption can be held constant and protein consumption increases, both infant mortality and fertility may fall. A fall in infant mortality may result in a fall in fertility, although the average length of the period of postpartum amenorrhea may fall. A combined examination of similar data from other cities of Zaire and a cross time study of other data sets may help unravel the complex biological and behavioral determinants of fertility.