This paper uses a sample of more than 2,500 firms from 27 countries to investigate the relation among ownership structure, analyst following, investor protection, and valuation. We find that analysts are less likely to follow firms with potential incentives to withhold or manipulate information, such as when the family/management group is the largest control rights blockholder. Furthermore, this relation is stronger for firms from low‐shareholder‐protection countries. Using valuation regressions that take into account potential endogeneity between analyst following and firm value, we find a positive valuation effect when analysts cover firms that have both potentially poor internal governance and weak country‐level external governance. Overall, our findings suggest that corporate governance plays an important role in analysts' willingness to follow firms and that increased analyst following is associated with higher valuations, particularly for firms likely to face governance problems.

This paper measures the importance of borrowing constraints on education decisions. Empirical identification of borrowing constraints is secured by the economic prediction that opportunity costs and direct costs of schooling affect borrowing-constrained and unconstrained persons differently. Direct costs need to be financed during school and impose a larger burden on credit-constrained students. By contrast, gross forgone earnings do not have to be financed. We explore the implications of this idea using four methodologies: schooling attainment models, instrumental variable wage regressions, and two structural economic models that integrate both schooling choices and schooling returns into a unified framework. None of the methods produces evidence that borrowing constraints generate inefficiencies in the market for schooling in the current policy environment. We conclude that, on the margin, additional policies aimed at improving credit access will have little impact on schooling attainment.

In the last decade, a debate has resurfaced about whether financial constraints stemming from asymmetric information and incentive problems play an important role in propagating monetary policy shocks. This paper investigates the monetary transmission mechanism in the UK and its impact on the availability of bank credit to small and medium size firms. The empirical specification is based on a disequilibrium model that allows for the possibility of transitory credit rationing. Sample firms are classified endogenously into ‘borrowing constrained’ and ‘borrowing unconstrained’. The analysis of credit rationing takes into account not only firm specific variables, but also important macroeconomic factors such as the prevailing monetary conditions and the stage of the business cycle. We find that (i) firms’ assets play an important role as collateral in mitigating borrowing constraints; (ii) during periods of tight monetary conditions corporate demand for bank credit increases, whereas the supply of bank loans is reduced; (iii) to avoid bank credit rationing smaller companies increase their reliance on interfirm credit; (iv) the proportion of borrowing constrained firms is significantly higher during the recession years of the early 1990s than at other times.

We study wealth effects for a sample of 156 spin-offs from 15 different European countries that were announced between January 1987 and September 2000. The cumulative average abnormal return over the 3-day event window is 2.62%. This number increases to 2.66% for the subsequently completed spin-offs. The cumulative average abnormal return is 3.57% for completed spin-offs by companies that increase their industrial focus and only 0.76% for non-focus increasing companies. The difference between these two sub-samples is significantly different from zero. These results are in line with previous studies for the US. The long-run returns in excess of matching firms are mostly insignificant for parents, subsidiaries and pro-forma combined firms. This result suggests that, unlike US spin-offs, European spin-offs are not associated with long-run superior performance.

This paper conducts powerful new tests of whether debt can mitigate the effects of agency and information problems. We focus on emerging market firms for which pyramid ownership structures create potentially extreme managerial agency costs. Our tests incorporate both traditional financial statement data and new data on global debt contracts. Our analysis is mindful of the potential endogeneity between debt, ownership structure, and value, and it takes into account differences in the debt capacity of a firm's assets in place and future growth opportunities. The results indicate that the incremental benefit of debt is concentrated in firms with high expected managerial agency costs that are also most likely to have overinvestment problems resulting from high levels of assets in place or limited future growth opportunities. Subsequent internationally syndicated term loans are particularly effective at creating value for these firms. Our results support the recontracting hypothesis that equity holders value compliance with monitored covenants, particularly when firms are likely to overinvest.

We present a model of the market for a used durable in which agents face fixed costs of adjustment, the magnitude of which depends on the degree of adverse selection in the secondary market. We find that, unlike typical models, the sS bands in our model contract as the variance of the shock increases. We also analyze a dynamic version of the model in which agents are allowed to make decisions that are conditional on the age of the durable. We find that, as the durable ages, the lemons problem tends to decline in importance, and the sS bands contract.

In May 1991 fifteen thousand Ethiopian Jews were brought to Israel in an overnight airlift and sorted in a haphazard and essentially random fashion to absorption centers across the country. This quasi-random assignment produced a natural experiment whereby the initial schooling environment of Ethiopian children can be considered exogenous to their family background and parental decisions. We examine the extent to which the initial elementary school environment affected the high school outcomes of Ethiopian children, using administrative panel data on the educational career of each child in Israel through much of the 1990s. The results show that the early schooling environment has an important effect on high school dropout rates, repetition rates, and the passing rate on matriculation exams necessary to enter college. The results are robust to using alternative measures of the schooling environment and to the inclusion of community fixed effects, which suggests that aspects of the elementary school itself are important for high school success.

Wage hedonic models are estimated with the Health and Retirement Study to measure the risk-wage tradeoffs (value of statistical lives) for older workers. The analysis explicitly allows for multiple employment states, including retirement, using a multinomial selection model. The results suggest that the oldest and most risk-averse workers require significantly higher, not lower, compensation to accept increases in job-related fatality risks. 2004 President and Fellows of Harvard College and the Massachusetts Institute of Technology. Classification-JEL: I12