MARKETS VS. MANAGEMENT: WHAT ‘DRIVES’ PROFITABILITY?

This study addresses the issue of the relative degree of variance in ROA accounted for by industry, corporate, and SBU effects while controlling for the business cycle and the interaction between the business cycle and industry. Two key articles, Schmalensee (1985) and Rumelt (1991), are discussed in detail. Research results on a recent data base (COMPUSTAT), using variance components analysis (VARCOMP) are presented that not only confirm most of the Rumelt (1991) findings, but also suggest the existence of a corporate effect, heretofore undetected.     

Back to the Beginning: Persistence and the Cross-Section of Corporate Capital Structure

We find that the majority of variation in leverage ratios is driven by an unobserved time-invariant effect that generates surprisingly stable capital structures: High (low) levered firms tend to remain as such for over two decades. This feature of leverage is largely unexplained by previously identified determinants, is robust to firm exit, and is present prior to the IPO, suggesting that variation in capital structures is primarily determined by factors that remain stable for long periods of time. We then show that these results have important implications for empirical analysis attempting to understand capital structure heterogeneity.     

An ‘art’, not a ‘science’? Central bank management in Portugal under the gold standard, 1863–871

As long as Portugal was on the gold standard, the Bank of Portugal sought to help stabilize the currency at the exchange rate to which the country was committed. Because it was subject to political and other non-economic constraints, the bank carried out discount rate interventions sparingly, although in accordance with what could be termed the contemporary ‘science’ of central banking. Consequently, it had to intervene frequently in the currency markets, usually in covert fashion, in order to conciliate the needs of convertibility with this less than orthodox stance towards the gold standard. This article also shows how the bank was able to keep on repeatedly infringing the ‘rules of the game’ with success for almost 30 years, and raises the question of the sustainability of such a state of affairs.     

Rank-Order Tournaments and Incentive Alignment: The Effect on Firm Performance

We investigate simultaneously the impact of promotion-based tournament incentives for VPs and equity-based (alignment) incentives for VPs and the chief executive officer (CEO) on firm performance. We find that tournament incentives, as measured by the pay differential between the CEO and VPs, relate positively to firm performance. The relation is more positive when the CEO nears retirement and less positive when the firm has a new CEO, and weakens further when the new CEO is an outsider. Our analysis is robust to corrections for endogeneity of all our incentive measures and to several alternative measures of tournament incentives and firm performance.     

Inattentive Producers

I present and solve the problem of a producer who faces costs of acquiring, absorbing, and processing information. I establish a series of theoretical results describing the producer's behaviour. First, I find the conditions under which the producer prefers to set a plan for the price he or she charges, or instead prefers to set a plan for the quantity he or she sells. Second, I show that the agent rationally chooses to be inattentive to news, only sporadically updating his or her information. I solve for the optimal length of inattentiveness and characterize its determinants. Third, I explicitly aggregate the behaviour of many such producers. I apply these results to a model of inflation. I find that the model can fit the quantitative facts on post-war inflation remarkably well, that it is a good forecaster of future inflation, and that it survives the Lucas critique by fitting also the pre-war facts on inflation moderately well.     

Term Structure Multiplicity and Clientele in Markets with Transactions Costs and Taxes

The authors investigate term structure with realistic transactions costs and taxes. Its properties are derived from a certain no-arbitrage condition via duality theory in convex programming. Transactions costs imply an infinite multiplicity of term structures. A simple example with realistic transactions costs shows that this multiplicity can induce a valuation range of over 277 basis points. Transactions costs also allow equilibrium without short sale restrictions. The authors find the minimum transactions costs that prevent arbitrage. In addition, the exact conditions for weak clientele, in which investors will not buy some bonds and may not sell any that they already hold, are established.     

外国直接投资流出:对中国通道的分析

<正>随着经济腾飞,中国正赢得世界各国的关注,不少研究也开始关注中国的对外直接投资。有分析指出,中国对外直接投资数量巨大,对其国内经济有着重要的作用。同时,这些投资金额对世界的影响也成为研究者们研究的目标。中国作为世界最重要的国家之一,有责任在对外直接投资上扮演重要角色。     

Stochastic Convenience Yield Implied from Commodity Futures and Interest Rates

We characterize a three‐factor model of commodity spot prices, convenience yields, and interest rates, which nests many existing specifications. The model allows convenience yields to depend on spot prices and interest rates. It also allows for time‐varying risk premia. Both may induce mean reversion in spot prices, albeit with very different economic implications. Empirical results show strong evidence for spot‐price level dependence in convenience yields for crude oil and copper, which implies mean reversion in prices under the risk‐neutral measure. Silver, gold, and copper exhibit time variation in risk premia that implies mean reversion of prices under the physical measure.     

Optimal Financial Instruments

Debt and equity are developed as optimal financial instruments in a model where cash flows and control rights are allocated to investors endogenously. When investment decisions must be made by a single party, the debtholder's cash flows are fixed in order to provide the equityholder with efficient incentives for investment. Ownership of control may be transferred to the debtholder to attenuate the impact of asymmetric information, concerning the investment opportunity, on the efficiency of the decision making.     

Portuguese living standards, 1720–1980, in European comparison: heights,income, and human capital1

When and why did the Portuguese become the shortest Europeans? In order to find the answer to this question, we trace the trend in Portuguese living standards from the 1720s until recent times. We find that during the early nineteenth century average height in Portugal did not differ significantly from average height in most other European countries, but that when, around 1850, European anthropometric values began to climb sharply, Portugal's did not. In a panel analysis of 12 countries, we find that delay in human‐capital formation was the chief factor hindering any improvement in the biological standard of living in Portugal.