Knowledge that Transforms

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An abstract is not available for this content so a preview has been provided. Please use the Get access link above for information on how to access this content.

An abstract is not available for this content so a preview has been provided. Please use the Get access link above for information on how to access this content.

Presently, foreign banks may enter the United States, depending on state law, in one of four forms:(1) Branches, (2) Agencies, (3) Affiliates, and(4) Representative offices.

Increasing emphasis on performance by the investment community has stimulated many innovations for accomplishing capital gains. Attention has been refocused on an established medium for this growth — investing in the new issue. Historically in and out of favor with security buyers, this particular type of investment has recently been enjoying unprecedented popularity.

Considerable attention has been given in recent years to studies of the cost of capital and investor preferences for dividends, but empirical analysis of the various theoretical propositions has been complicated by numerous difficulties associated with estimating the parameters in question. In many of the empirical studies, ordinary least squares has been the statistical method applied because, under certain assumptions, ordinary least squares produces unbiased estimates with a minimum of variance. However, the validity of one of the assumptions, namely, that all independent variables contain no measurement error, has been questioned by numerous writers. More specifically, it has been argued that investors tend to ignore temporary or random disturbances in current reported earnings. Thus, values of current earnings that are actually observed for the statistical study may be different from those values which ideally would be observed; i.e., they may contain measurement error, the size of which is reflected by the difference between the current reported earnings and the values on which investors presumably base their decisions. For example, in such least squares regressions as price on dividends and retained earnings, the impact of the measurement error is considered to fall mainly on the retained earnings, since dividends are thought to be relatively stable.

With the rapid growth in various types of corporate combinations, many opportunities arise in which increased internal efficiency in the allocation of capital budgeting resources may be obtained. Although the resource-transfer methodology proposed in this paper is discussed within the context of a merger/acquisition environment, the operational analysis conveivably could be applied to multiproduct, multifirm, or multinational situations. This study examines an application in which a linear programming model can be used operationally as an analytical planning device (1) to obtain efficient capital budgets for the merged companies, and (2) to quantify the monetary value of potential gains in efficiency produced by a merger. Conceptually, the model assists management in searching for excess capacity in each company, efficiently combines scarce resources, selects an optimal project list for the merged company, and indicates what the composition of the new capital budget should be. In addition, a variable step function provides for multiplicative adjustments in common resource constraints. These adjustments might be positive (negative) if the combination results in a more than proportionate increase (decrease) in the availability of a scarce resource.

Based upon the ubiquitous nature of cash flow projections in the decision-making process, it would be desirable to be able to find answers to questions of the following form:(1) How does the level of variability in demand affect the cash outflows for payment of accounts payable liabilities?(2) Does the method used in planning production influence the firm's cash flow patterns?Analysis of existing attempts to model the cause and effect relationships within the cash flow process reveals that the ability to answer questions similar to the ones posed above does not exist. The research accomplished to date can be characterized as being definitional and hypothetical; cash flows have been defined, lists of factors that may influence cash flow patterns have been postulated, and simple examples of what may happen to cash flow patterns have been constructed. Although these preliminary steps are necessary, they are not sufficient for a thorough understanding of the cash flow process. Analysis must be undertaken to establish the cash flow consequences of various combinations of environmental and organizational factors.

Presence of a variable market demand function for a given product has significant implications for factor input levels and for the resulting production costs to the firm. In a recent paper, McKean argues that in order to describe the costs of producing a product subject to fluctuating demand it is necessary to take into account the entire distribution of outputs as it relates to the static total cost function. While it is evident that influences on costs and factor inputs will differ in the case of a fluctuating demand schedule compared to the conventional stable demand conditions of classical micro theory, it is not clear that the use of a static cost function in conjunction with a probability distribution of outputs is the proper framework in which to examine the problem.

This paper analyzes risk-return relationships in regional and national securities markets. Specifically, it presents methods and results of an investigation of simulated portfolios of common stocks traded on the Minnesota over-the-counter (OTC) market and the New York Stock Exchange (NYSE).