This paper uses an empirical dynamic oligopoly model of the commercial aircraft industry to analyse industry pricing, industry performance, and optimal industry policy. A novel feature of the model with respect to the previous literature is that entry, exit, prices, and quantities are endogenously determined in Markov perfect equilibrium (MPE). We find that many unusual aspects of the aircraft data, such as high concentration and persistent pricing below static marginal cost, are explained by this model. We also find that the unconstrained MPE is quite efficient from a social perspective, providing only 10% less welfare on average than a social planner would obtain. Finally, we provide simulation evidence that an anti-trust policy in the form of a concentration restriction would be welfare reducing. Copyright 2004, Wiley-Blackwell.

To investigate how a fixed exchange rate affects monetary policy, this paper classifies countries as pegged or non-pegged and examines whether a pegged country must follow the interest rate changes in the base country. Despite recent research which hints that all countries, not just pegged countries, lack monetary freedom, the evidence shows that pegs follow base country interest rates more than non-pegs. This study uses actual behavior, not declared status, for regime classification; expands the sample including base currencies other than the dollar; examines the impact of capital controls, as well as other control variables; considers the time series properties of the data carefully; and uses cointegration and other levels-relationship analysis to provide additional insights.

We study management turnover for the top five executives in a sample of 443 large firms from 1993 through 1998. The rate of forced turnover for non-CEOs is at least as great as that for CEOs, but the sensitivity of turnover to firm performance is smaller for non-CEOs. The probability that a non-CEO leaves office is elevated around CEO dismissals, particularly when the replacement CEO is an outsider. Many dismissed executives obtain new employment, but on average their new positions are significantly inferior to their prior jobs. Labor market outcomes are related to past compensation and the circumstances around departure.

We investigate the upstream and downstream product-market effects of a large sample of horizontal mergers and acquisitions from 1980 to 1997. We construct a data set that identifies the corporate customers, suppliers, and rivals of the firms initiating horizontal mergers and use this data set to examine announcement-related stock market revaluations and post-merger changes in operating performance. We find little evidence consistent with increased monopolistic collusion. However, we do find evidence consistent with improved productive efficiency and buying power as sources of gains to horizontal mergers. The nature of the buying power gains, i.e., rents from monopsonistic collusion or improved purchasing efficiency, is also investigated.

We examine the relation between firm diversification and asymmetric information empirically using metrics drawn from the market microstructure literature. We find that the average diversified firm in our sample has somewhat less severe asymmetric information problems than a similarly constructed portfolio of stand-alone firms chosen to approximate the segments of the conglomerate. We also find that the information asymmetry of diversified firms is very similar to that of individual focused firms that approximate the conglomerates along several dimensions not including industry composition. We conclude that greater diversification is not on average associated with increased asymmetric information.

ABSTRACT This paper considers how the presence of a speculative investor, who bets on a firm's future earnings report, affects how the firm's management manipulates that report. We examine the influence of the speculator's information on earnings management behavior, quality of reported earnings, and stock price efficiency. We also provide predictions for, and interpretations of, short‐window event studies and long‐window association studies.