[This article studies mergers between competing firms and shows that while such mergers reduce the level of product market competition, they may have an adverse effect on employee incentives to innovate. In industries where value creation depends on innovation and development of new products, mergers are likely to be inefficient even though they increase the market power of the post-merger firm. In such industries, a stand-alone structure where independent firms compete both in the product market and in the market for employee human capital leads to a greater profitability. Furthermore, our analysis shows that multidivisional firms can improve employee incentives and increase firm value by reducing firm size through a spinoff transaction, although doing so eliminates the economies of scale advantage of being a larger firm and the benefits of operating an internal capital market within the firm. Finally, our article suggests that established firms can benefit from creating their own competition in the product and labor markets by accommodating new firm entry, and the desire to do so is greater at the intermediate stages of industry/product development

This article studies mergers between competing firms and shows that while such mergers reduce the level of product market competition, they may have an adverse effect on em-ployee incentives to innovate. In industries where value creation depends on innovation and development of new products, mergers are likely to be inefficient even though they increase the market power of the post-merger firm. In such industries, a stand-alone struc-ture where independent firms compete both in the product market and in the market for employee human capital leads to a greater profitability. Furthermore, our analysis shows that multidivisional firms can improve employee incentives and increase firm value by re-ducing firm size through a spinoff transaction, although doing so eliminates the economies of scale advantage of being a larger firm and the benefits of operating an internal capital market within the firm. Finally, our article suggests that established firms can benefit from creating their own competition in the product and labor markets by accommodating new firm entry, and the desire to do so is greater at the intermediate stages of industry/product development. (JEL G34) This article studies the effect of mergers on employee incentives and shows

[Academics responded to the challenges posed by the 2008 financial crisis with a flurry of studies. This collection of articles is just the academic community's first look into it. The articles begin with an examination at the last national housing price crash: the great depression of the 1930s. This is followed by articles looking at the current mortgage market and how it behaved. Did modern innovations reflect or add to the downturn? The next set of papers examines how non-financial firms were impacted by the crash. To what degree did credit worthy firms nevertheless find themselves without access to capital? The papers then end with a look into how the banking sector itself fared throughout this period

Academics responded to the challenges posed by the 2008 financial crisis with a flurry of studies. This collection of articles is just the academic community's first look into it. The articles begin with an examination at the last national housing price crash: the great depression of the 1930s. This is followed by articles looking at the current mortgage market and how it behaved. Did modern innovations reflect or add to the downturn? The next set of papers examines how non-financial firms were impacted by the crash. To what degree did credit worthy firms nevertheless find themselves without access to capital? The papers then end with a look into how the banking sector itself fared throughout this period

[We identify a "slope" factor in exchange rates. High interest rate currencies load more on this slope factor than low interest rate currencies. This factor accounts for most of the cross-sectional variation in average excess returns between high and low interest rate currencies. A standard, no-arbitrage model of interest rates with two factors—a country-specific factor and a global factor—can replicate these findings, provided there is sufficient heterogeneity in exposure to global or common innovations. We show that our slope factor identifies these common shocks, and we provide empirical evidence that it is related to changes in global equity market volatility. By investing in high interest rate currencies and borrowing in low interest rate currencies, U.S. investors load up on global risk

We identify a "slope" factor in exchange rates. High interest rate currencies load more on this slope factor than low interest rate currencies. This factor accounts for most of the cross-sectional variation in average excess returns between high and low interest rate currencies. A standard, no-arbitrage model of interest rates with two factors--a country-specific factor and a global factor--can replicate these findings, provided there is sufficient heterogeneity in exposure to global or common innovations. We show that our slope factor identifies these common shocks, and we provide empirical evidence that it is related to changes in global equity market volatility. By investing in high interest rate currencies and borrowing in low interest rate currencies, U.S. investors load up on global risk. The Author 2011. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: [email protected]., Oxford University Press