To create value and reduce agency costs, firms adopt available organizational structures that match their attributes. This paper studies the characteristics of firms that choose to become master limited partnerships (MLPs). The MLP sample is dominated by firms in low-growth industries that have highly focused operations and superior profitability compared to their industry peers. After becoming an MLP, sample firms reduce capital expenditures and increase cash distributions, taking advantage of their focus, profitability, and status as non-taxable entities. A subsample of MLPs subsequently change back to corporate form. After becoming corporations, these firms reverse course by cutting cash distributions and increasing capital spending. This cycle demonstrates how firms restructure to adopt organizational forms that best fit their needs.

We construct a simple measure of the aggregate illiquidity of hedge fund portfolios, based on the cross-sectional average first-order autocorrelation coefficient of hedge fund returns, and show that it has strong and robust in- and out-of-sample forecasting power for 72 portfolios of international equities, U.S. corporate bonds, and currencies over the 1994 to 2013 period. The forecasting ability of hedge fund illiquidity for asset returns is in most cases greater than, and provides independent information relative to, well-known predictive variables. We rationalize these findings using a simple equilibrium model, in which hedge funds provide liquidity in asset markets.

This paper examines the role of economic factors in determining retirement behavior using a unique new data archive on more than 8,700 workers covered by 10 different pension plans. We build on our earlier work by estimating several different retirement models including both linear and discrete choice formulations. This framework provides new insights into how and why retirement ages differ across firms. We conclude that older workers' income opportunities differ depending on their pension rules, which in turn have a powerful influence on their retirement patterns. In addition, the models indicate that older workers' tastes for income are not uniform, either across individuals or across firms. Finally, we show that retirement age differences are due in part to differences in worker preferences and in part to differences in income opportunities. There appears to be some evidence of worker sorting across pension plans.

This paper presents a model of large institutional and small individual investors choosing stocks. Dividend policy of firms is determined by the preferences of the resulting stockholders. Large investors choose to invest in large corporations because it lowers their transaction costs. Since these institutions prefer dividends, the large corporations choose to pay dividends, while the small corporations, owned by individuals, do not. The results show that firm size and liquidity explain the decision ofwhetherto pay dividends well, whereas existing informational explanations (such as monitoring and signaling) explain thelevelof dividends well.Journal of Economic LiteratureClassification Numbers: G32, G35, G11.

A two‐period model in which communication restrictions preclude the usual revelation representation is analyzed, and the communication policies take on the appearance of “income smoothing.” The driving force is the information content of the “smoothed” or manipulated series, relative to its counterpart were manipulation not possible. Various possibilities arise, depending on the underlying stochastic structure: performance measure manipulation might be socially efficient, or not; and when it is best to invite and motivate this manipulation, the optimal policy itself can take on a variety of forms.

This paper discusses the decentralization of production and cost decisions in a multidivisional firm via divisional performance measurement systems based on accounting information. The model firm has a single producing division that supplies goods to several consuming divisions for further processing and sale on external markets. Production is assumed to be characterized, in the long run, by constant returns to scale, and, in the short run, by constant unit variable cost up to a fixed capacity, which imposes a short‐run fixed cost. It is also assumed that the final products sold on external markets face downward sloping demand. The firm's accounting information system transmits a comprehensive record of quantities, revenues, and costs resulting from realized transactions, including the classification of costs between fixed and variable, but transmits no information concerning unrealized production, cost, and revenue possibilities. The paper shows that such information is not sufficient to motivate short‐run profit maximization, which requires the optimal allocation of scarce producing division capacity among the competing demands of the consuming division. However, in the long run, a more positive result is obtained. A class of transfer price mechanisms, termed profit‐sharing systems , leads net‐income maximizing division managers to optimal production decisions and cost ‐efficient technology choices in the long run. Moreover, it is shown that the profit‐sharing transfer price is equal to the “arm's‐length” negotiated price determined by the Nash bargaining solution. Résumé. L'auteur traite de la décentralisation des décisions relatives à la fabrication et aux coûts dans une entreprise à divisions multiples, par l'intermédiaire de systèmes de mesure du rendement divisionnaire fondés sur l'information comptable. L'entreprise type possède une seule division de fabrication qui approvisionne plusieurs divisions consommatrices en produits intermédiaires qui sont retraités par elles et vendus sur les marchés extérieurs. L'auteur suppose que la fabrication se caractérise à long terme par des rendements d'échelle constants, et à court terme par des coûts variables unitaires constants au regard d'une capacité établie qui suppose un coût fixe à court terme. Il pose également l'hypothèse que la demande pour les produits finis vendus sur les marchés extérieurs connaît un déclin. Le système d'information comptable de l'entreprise comporte un registre complet des renseignements concernant les quantités fabriquées, les produits d'exploitation et les coûts relatifs aux opérations ainsi conclues, avec classification des coûts fixes et varibles, mais ne livre aucune information relative aux possibilités de fabrication, de coûts et de produits d'exploitation auxquelles l'entreprise a renoncé. L'auteur montre que cette information ne suffit pas à motiver la maximisation des bénéfices à court terme, qui exige l'affectation optimale des capacités de fabrication limitées de la division de fabrication entre les divisions consommatrices dont les demandes sont en concurrence. À long terme, l'on obtient cependant un résultat plus positif. En effet, un ensemble de mécanismes touchant l'établissement des prix de cession, qu l'on appelle les systèmes d'intéressement, amène les gestionnaires qui cherchent à maximiser le bénéfice net de leur division à des décisions optimales de fabrication et à des choix économiques rationnels en matière de technologie. On constate en outre que le prix de cession en système d'intéressement est équivalent au prix négocié « sans lien de dépendance » déterminé selon la solution de négociation de Nash.

This paper offers some impressions of current research in accounting. Three themes are identified: Movement toward imbedding accounting thought in (1) a setting that accommodates substitutes for the accounting product, (2) a dynamic view of the environment in which the accounting product is used, and (3) a model of human cognition that generates explicit demand for decision support activities. It is also suggested that closer correlation between theoretical and empirical research would be productive. Résumé. Cet article présente quelques impressions sur la recherche actuelle en comptabilité. Trois thèmes sont identifiés. Un mouvement visant à enchâsser la pensée comptable dans (1) un cadre qui inclut les compléments au produit comptable (2) une vision dynamique de l'environnement dans lequel le produit comptable est utilisé et (3) un modèle de connaissance humaine qui génère une demande explicite pour des activités de support à la prise de décision. Il est également suggéré qu'une corrélation plus étroite entre la recherche théorique et empirique serait productive.

ECONOMISTS generally take tastes as given and work out consequences of changes in prices, incomes, and other variables under assumption that tastes do not change. When pressed, either they engage in ad hoc theorizing or they explicitly delegate discussion of tastes to sociologist, psychologist, or anthropologist. Unfortunately, these disciplines have not developed much in way of systematic usable knowledge about tastes. Although economists have been reluctant to discuss systematically changes in structure of tastes, they have long relied on assumptions about basic and enduring properties of tastes. Self-interest is assumed to dominate all other motives,' with a prominent place also assigned to benevolence toward children2 (and occasionally others), and with self-interest partly dependent on distinction and other aspects of one's position in society.3 The dominance of self-interest and persistence of some benevolence have usually been explained by nature, or an equivalent evasion of problem. The development of modern biology since mid-nineteenth century and of population genetics in twentieth century made clear that is only beginning, not end of answer. The enduring traits of human (and animal) nature presumably were genetically selected under very different physical environments and social arrangements as life on earth evolved during millions of years. It is not difficult to understand why self-interest has high survival value under very different circumstances,4 but why should altruistic behavior, sometimes observed among animals as well as human beings, also survive? This kind of question has been asked by some geneticists and other biologists especially during last two decades. Their work has recently been christened sociI For example, Adam Smith said, We are not ready to suspect any person of being defective in selfishness [9, 1969, p. 446], and it is not from benevolence of butcher, brewer, or baker, that we expect our dinner, but from their regard to their own interest [10, 1937, p. 14]. 2According to Alfred Marshall, . . men labor and save chiefly for sake of their families and not for themselves [6, 1920, p. 228]. 3Nassau Senior said, the desire for distinction . . . may be pronounced to be most powerful of human passions [8, 1938, p. 12]. 4Ronald Coase argues convincingly that Adam Smith, especially in his Moral Sentiments, was groping toward an explanation of importance of selfinterest in terms of its contribution to viable social and economic arrangements (see Coase [5, 1976]).