We investigate firms’ choices between the purchase and pooling methods in stock-for-stock acquisitions. We find that in acquisitions with large step-ups to targets’ net assets, CEOs with earnings-based compensation are more likely to choose pooling and avoid the earnings ‘penalty’ associated with purchases. We find no association between stock-based compensation and the purchase–pooling choice, suggesting that managers are not concerned about implications of large step-ups for firms’ equity values. We also find that the likelihood of purchase increases with debt contracting costs, consistent with its favorable balance sheet effects, and with costs of qualifying for pooling, particularly the restriction of share repurchases.

In this paper, we examine the welfare effects of pre-production commitments made by firms competing in oligopoly markets and disclosure of such commitments. By commitments we refer to any device that provides a strategic incentive to alter production choices. Examples include forward contracts, capital structure, research and development investment, terms of compensation, and cost allocation. If the only purpose underlying commitment is to gain a strategic advantage in product market competition, then the result with disclosure can be characterized by Stackelberg warfare. Many potential commitments have non-strategic effects, implying a trade-off when optimizing, with imperfect achievement of both strategic (deterring rival production) and non-strategic goals. However, given disclosure, we show that in the limit as the number of commitment devices becomes large, firms achieve full Stackelberg warfare and total realization of non-strategic goals. Disclosure in this context is social welfare enhancing.

We examine the impact of changes in Greek sovereign yield spreads on abnormal returns of financial sector stocks for a sample of Eurozone countries, during the Greek debt crisis. We find that increases in yield spreads are associated with negative abnormal returns on financial stocks in the Portugal, Spain and Netherlands. These abnormal returns are driven in part by ratings downgrades and other unfavorable news announcements about Greece. We isolate the effects of known transmission channels–impairment of financial firms’ asset base due to cross-holdings of Greek bonds, from increases in domestic interest rates and higher funding costs. Our analysis indicates that news events lead to spillovers in excess of what can be explained by these channels of transmission.

ABSTRACT: In this study, we consider the effects of the asymmetry in capital gains tax policy on the communication of private information to investors. Assuming quite plausibly that firm managers tend to favor current stockholder returns relative to future stockholder returns, though not exclusively, we identify conditions under which limitations on the deductibility of capital losses lend efficacy to unverified public disclosures that allow managers of higher value firms to separate from lower value firms in equilibrium. Although the tax asymmetry by itself may not be enough to enable separation, we show how it would nevertheless contribute to the efficiency of separation through explicitly dissipative signals. It further follows that if separation would occur by means of a dissipative signal in any event, then the tax asymmetry is welfare-enhancing. Our findings demonstrate that tax asymmetry can help resolve information asymmetry.

The present article is an attempt to resolve the controversies concerning the concept of barriers to entry. We begin by contrasting the definitions of an entry barrier proposed in the economics literature. We then introduce a classification system to clear up the existing confusion, and we employ it to assess the nature of the barriers posed by scale economies and sunk costs.