DATA relating to the size distribution of income in the United States, fragmentary as they are,2 support the thesis that income is more equally distributed today than it was during the prewar period. Although families at the very lowest income levels do not appear to have gained appreciably in the redistribution of income, there can be little doubt that the middle-income families have gained at the expense of the wealthiest families. The share of the income received by the top fifth of the nation's families and single persons decreased by I2 per cent between I935-36 and I948, whereas the share received by the middle three-fifths increased by I4 per cent during the same period (Table i). What factors account for this

Vihang R. Errunza, Darius P. Miller, Market Segmentation and the Cost of Capital in International Equity Markets, The Journal of Financial and Quantitative Analysis, Vol. 35, No. 4 (Dec., 2000), pp. 577-600

This paper examines the shareholder wealth effects associated with global equity offerings made by foreign firms after their initial cross-listing in the United States. We document that the market reaction to seasoned global equity offerings is economically and statistically insignificant. However, it is 1.5% larger than the market reaction to offerings made on local exchanges only. In addition, we find that the adverse market reaction to local equity offerings is mitigated as more capital is raised globally. Our findings support the hypothesis that global capital raising is associated with significant benefits.

This study examines the effects of financial reporting complexity on investors’ trading behavior. I find that more complex (longer and less readable) filings are associated with lower overall trading, and that this relationship appears due to a reduction in small investors’ trading activity. Additional evidence suggests that the association between report complexity and lower abnormal trading is driven by both cross-sectional variation in firms’ disclosure attributes and variations in disclosure complexity over time. Given regulatory concerns over plain English disclosures and the trend toward more disclosure, my investigation into the effects of reporting complexity on small and large investors should be of interest to regulators concerned with reporting clarity and leveling the playing field across classes of investors.

This paper exploits the staggered initiation of takeover laws across countries to examine whether the threat of takeover enhances managerial discipline. We show that following the passage of takeover laws, poorly performing firms experience more frequent takeovers; the propensity to replace poorly performing CEOs increases, especially in countries with weak investor protection; and directors of targeted firms are more likely to lose board seats following corporate-control events. Our findings suggest that the threat of takeover causes managerial discipline through the incentives that the market for corporate control provides to boards to monitor managers.

This article studies the ability of security-level contracts to substitute for poor country-level investor protections. Using a cross-country sample of restrictive covenants, we find that bond contacts are more likely to include covenants when creditor protection laws are weak. Further, the use of restrictive covenants in weak creditor protection countries is associated with a lower cost of debt. We also find that strong country-level shareholder rights are not necessarily harmful to bondholders. Overall, the findings suggest that issuers and investors can create international contracts that overcome some of the deficiencies of country-level investor protections and facilitate access to external finance.