Examining 128 tender offer bids made from 1980 through 1987, we categorize outside directors as either independent of or having some affiliation with managers, and find that bidding firms on which independent outside directors hold at least 50% of the seats have significantly higher announcement-date abnormal returns than other bidders. However, the relationship between bidding firms' abnormal stock returns and the proportion of board seats held by independent outside directors is nonlinear, suggesting it is possible to have too many independent outside directors. All results are lost if the traditional inside-outside board classification method is used.

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 contrast with numerous studies that find significant underpricing for initial public offerings of industrial firms, we document a statistically significant average return of −2.82% on the first trading day for a sample of 87 initial public offerings of real estate investment trusts during the 1971–1988 period. Our overpricing result is invariant to offer price, issue size, distribution method, offer period, and underwriter reputation. Newly issued REITs, on average, substantially underperform a matching sample of seasoned REITs during the first 190 trading days. Interestingly, buyers of overpriced REITs are predominantly individual or non-13(f) institutional investors.

This study investigates the returns to acquiring-firm stockholders in federally assisted mergers in the savings and loan industry. It is unique in that (a) these mergers are arranged and subsidized by government regulators and (b) they occur in a single industry, one plagued by well-publicized financial difficulties. The contribution of resources by the federal government creates the possibility of wealth transfers from the government to owners of the acquiring firms. We find, consistent with the oversubsidization hypothesis, that shareholders of acquiring firms earn significant positive returns.

This paper uses new data on the holdings of 769 tax-exempt (predominantly pension) funds, to evaluate the potential effect of their trading on stock prices. We address two aspects of trading by these money managers: herding, which refers to buying (selling) simultaneously the same stocks as other managers buy (sell), and positive-feedback trading, which refers to buying past winners and selling past losers. These two aspects of trading are commonly a part of the argument that institutions destabilize stock prices. The evidence suggests that pension managers do not strongly pursue these potentially destabilizing practices.

We estimate the conditional distribution of trade-to-trade price changes using ordered probit, a statistical model for discrete random variables. This approach recognizes that transaction price changes occur in discrete increments, typically eighths of a dollar, and occur at irregularly-spaced time intervals. Unlike existing models of discrete transactions prices, ordered probit can quantify the effects of other economic variables like volume, past price changes, and the time between trades on price changes. Using 1988 transactions data for over 100 randomly chosen U.S. stocks, we estimate the ordered probit model via maximum likelihood and use the parameter estimates to measure several transaction-related quantities, such as the price impact of trades of a given size, the tendency towards price reversals from one transaction to the next, and the empirical significance of price discreteness.

We develop an analytical framework to explain firm's choice of equity flotation method and the near disappearance of rights offers by U.S. exchange-listed firms. The choice between uninsured rights, rights with standby underwriting, and firm-commitment underwriting depends on information asymmetries, shareholder characteristics, and direct flotation costs. Underwriter certification and current-shareholder takeup are viewed as substitute mechanisms for minimizing wealth transfers between shareholders and outside investors. Uninsured rights create adverse-selection effects when shareholder takeup is low. Implications for stock-price behavior around issue announcements, shareholder subscription precommitments, and relative issue frequencies are supported by large-sample evidence.