We examine explanations for corporate financing-, dividend-, and compensation-policy choices. We document robust empirical relations among corporate policy decisions and various firm characteristics. Our evidence suggests contracting theories are more important in explaining cross-sectional variation in observed financial, dividend, and compensation policies than either tax-based or signaling theories.

In this paper, we build on the recent literature on coordination problems to construct a model in which there is potential for low-output equilibrium. We show that the conditions that guarantee interior Walrasian equilibria in conjunction with a continuity restriction on strategies rule out equilibria with extremely low levels of activity (zero activity), which is a distinguishing feature of many existing models. We study the case of separability and show that there is no rationing and, hence, no equilibrium unemployment. In addition, in a numerical example, we find that there is a unique symmetric equilibrium.

We document and attempt to explain the observation that automobile insurance premiums vary dramatically across cities. We argue that high premiums can be attributed, at least in part, to large numbers of uninsured motorists in some markets, while uninsured motorists can be attributed to high premiums. We construct a simple noncooperative equilibrium model that can generate inefficient equilibria with uninsured drivers and high, yet actuarially fair, premiums. For certain parameterizations, an efficient full-insurance equilibrium and inefficient high-price equilibria with uninsured drivers exist simultaneously, helping to explain price variability across otherwise similar cities. Policy implications are discussed.

Non-nested tests are proposed for competing models estimated by generalized method of moments. Results are presented for non-nested linear regression models with het- eroskedasticity and serial correlation of unknown form and differing instrument validity assumptions. Regression forms of the statistics are also presented. THIS PAPER IS CONCERNED with providing a procedure whereby non-nested models estimated by generalized method of moments (GMM) (Hansen (1982)) may be com- pared. In particular, Cox-type (Cox (1961, 1962)) and encompassing tests (Mizon and Richard (1986)) are proposed. Implicit in such tests is a degree of arbitrariness in the way the statistics are constructed as, typically, the assumptions underlying GMM estima- tion techniques are minimal and do not fully specify the data generation process (DGP) underlying the observable random variables, in contradistinction to the method of maximum likelihood. Our procedures allow the population moment conditions on which GMM estimation of the competing models is based to differ in the conditioning sets under which conditional expectation is taken; such differences may reflect different a priori assumptions concerning the exogeneity status of random variables in the models. These tests may be regarded as generalizations of Singleton (1985). More recent work includes Ghysels and Hall (1990) which requires the specification of the DGP under the null hypothesis and Wooldridge (1990b) which proposes heteroskedasticity-robust tests for non-nested non-linear regression models. Our results are specialized to provide non-nested tests for competing regression models estimated by instrumental variables, where we allow a degree of heteroskedastic- ity and serial correlation in the process generating the disturbance terms, by assuming appropriate mixing conditions (White (1984)), and the instrument validity assumptions to differ across the models; cf. Godfrey (1983, 1984) which assume a scalar covariance matrix for the disturbances and that the set of instruments is valid in both models. Thus, our framework includes models which may be both simultaneous and dynamic. Section 2 describes procedures for obtaining Cox-type and encompassing tests for competing models estimated by GMM. Section 3 specializes these results to competing linear regression models estimated by instrumental variables; regression forms for the statistics are presented. The paper is concluded by Section 4. In our presentation, we eschew detailed regularity assumptions.

This paper develops and tests hypotheses that explain the choice of accounts receivable management policies. The tests focus on both cross-sectional explanations of policy-choice determinants, as well as incentives to establish captives. The authors find size, concentration, and credit standing of the firm's traded debt and commercial paper are each important in explaining the use of factoring, accounts receivable secured debt, captive finance subsidiaries, and general corporate credit. They also offer evidence that captive formation allows more flexible financial contracting. However, the authors find no evidence that captive formation expropriates bondholder wealth.

This paper develops and tests hypotheses that explain the choice of accounts receivable management policies. The tests focus on both cross‐sectional explanations of policy‐choice determinants, as well as incentives to establish captives. We find size, concentration, and credit standing of the firm's traded debt and commercial paper are each important in explaining the use of factoring, accounts receivable secured debt, captive finance subsidiaries, and general corporate credit. We also offer evidence that captive formation allows more flexible financial contracting. However, we find no evidence that captive formation expropriates bondholder wealth.