This paper reviews the theory and evidence on the process by which corporations raise debt and equity capital and the associated effects on security prices. Findings from related transactions are used to test hypotheses about the stock price patterns accompanying announcements of security offerings. Various contractual alternatives employed in security issues are examined; for example, rights or underwritten offers, negotiated or competitive bid, best efforts or firm commitment contracts, and shelf or traditional registration. Finally, incentives for underpricing new issues are analyzed.

This paper provides an analysis of the choice of method for raising additional equity capital by listed firms. Examination of expenses reported to the SEC indicates that rights offerings involve significantly lower costs; yet underwriter are employed in over 90 percent of the offerings. The underwriting industry, finance textbooks, and corporate proxy statements offer several justifications for the use of underwriters. However, estimates of the magnitudes of these arguments indicate that they are insufficient to justify the additional costs of the use of underwriters. The use of underwriters thus appears to be inconsistent with rational, wealth-maximizing behavior by the owners of the firm. The paper concludes with an examination of alternate explanations of the observed choice of financing method.

Recent advances in the general equilibrium pricing of simple put and call options lay the foundation for the development of a general theory of the valuation of contingent claims assets. This paper provides a review of: (1) the development of the general equilibrium option pricing model by Black and Scholes, and the subsequent modifications of this model by Merton and others; (2) the empirical verification of these models; and (3) applications of these models to value other contingent claim assets such as the debt and equity of a levered firm and dual purpose mutual funds.

T HE index numbers of prices here presented in monthly form for the period I795 to I824 were constructed as a part of a study of the financial history of the United States during and immediately following the War of i8I2.1 To students of international trade, government finance, and money, banking, and prices, the developments of a hundred years ago are of interest because of the similarity between that period and the recent war and post-war period. It is hoped that the index numbers of commodity prices at wholesale may be of service to students of the history of these years. Such series provide a continuous record around which non-quantitative data may be organized, and, being sensitive barometers of economic life, they enable us to say something concerning the timing and the magnitude of the effect of the forces at work. A description of the construction of the indexes of prices in the United States from I795 to I824 is given in Part I below. Three indexes of prices in the Boston marketone of the prices of domestically produced goods, one of imported goods, and one of domes'tically produced and imported goods (the all commodities index) have been computed by months for the 30 years. In this section also indexes of prices of domestic goods quoted in the markets of New York, Philadelphia and Baltimore, from i8io to I8I9, are presented. In Part II the index numbers for the years i802-2o,have been examined to find out when business recessions and crises occurred, and some non-statistical material has been quoted which helps to explain the movements of prices in this period. Our conclusions concerning the causes of fluctuations in prices must necessarily be tentative, for the data upon which our judgment must be based are fragmentary.

We provide a positive analysis of a firm's decision to report the operations of a financial subsidiary on a consolidated versus an unconsolidated basis. Our evidence indicates that the firm is more likely to choose consolidated reporting the greater the operating, financial, and informational interdependencies between parent and subsidiary. Moreover, our evidence offers no support for the FASB hypothesis that firms use unconsolidated financial subsidíaries to understate the fixed claims on their balance sheets.

We examine an unusual sample of firms within the life insurance industry: 30 firms which switched from a common-stock to a mutual-ownership structure. Our evidence indicates that the rate of growth of premium income from policyholders remains unchanged, stockholders receive a premium for their stock, and management turnover declines; thus, no group of claimholders systematically loses in the sample of firms which choose to go through the mutualization process. We therefore conclude that for this sample of firms, changing from a stock to a mutual-ownership structure is on average efficiency-enhancing.

This article focuses on the prudent investment theory in public utility rate making. It is author's opinion that successful regulation of public utility rates cannot be accomplished under the fair-value doctrine and that the investment method must be sanctioned if justice is to be done to the consumer, the utility, and the general public as well. Stated somewhat differently the author believes the fair-value basis of rate making altogether impracticable and unworkable, that it is basically wrong in its economic concept, that the circumstances which gave birth to the principle have long since ceased to exist, and that is a reasonably good job of public utility rate regulation is to be achieved it is through investment approach. No review of rate regulatory procedures in this country would be complete without a brief reference to leading decisions of the Supreme Court of the U.S. on the subject. Not only did the fair-value doctrine, which plagued regulation for many years, have its real genesis in a decision of that Court, but the decisions of that body have greatly influenced the thinking and pretty well dominated the practices in respect to public utility rate regulation.

The Uniform System of Accounts of the Federal Power Commission, which was adopted on June 16, 1936, was the result of a joint effort of the Federal Power Commission and representatives of several state commissions. The principle of original cost constitutes an entirely new conception of plant accounting for public utilities. It is so important to the needs of regulation and so misunderstood by those outside the pale of regulatory realms and so little has been written to explain its philosophy, that perhaps a rather full treatment of what it is and the reasons for its existence may not be altogether inappropriate. The importance of plant accounting for public utilities can hardly be overemphasized. Plant assets constitute about 86% of total assets of all electric utilities in the U.S. Another factor, which goes a long way towards explaining many problems and economic consequences identified with public utilities, is that the annual gross revenues of electric utilities amount, on an average, to only about 18% of the total investment in plant, so that the plant investment turns over about once in five and one-half years.