This article presents evidence about the effects of dismissals‐for‐cause requirements, a specific component of employment protection legislation that has received little attention. I study a quasi‐experiment generated by a law introduced in Portugal: out of the 12 paragraphs in the law that dictated the costly procedure required for dismissals for cause, eight did not apply to small firms. Using matched employer‐employee longitudinal data and difference‐in‐differences methods, I examine the impact of that differentiated change in firing costs upon several variables. The results do not indicate robust effects on job or worker flows, although some estimates suggest an increase in hirings. However, firms that gain flexibility in their dismissals exhibit sizable increases in their relative performance. This finding suggests that reducing firing costs of the type studied here increases workers’ effort.

Abstract We show that acquirer returns are significantly higher in stock-swap acquisitions of difficult-to-value targets, as measured by R&D intensity and idiosyncratic return volatility. This finding contributes to an explanation of the determinants of, and value gains from, using stock as a method of payment. The effects of target-valuation uncertainty on both the method of payment and the market reaction to acquisitions are more likely to be apparent in samples of private acquisitions, as these effects can be masked in samples of acquisitions of publicly held targets. Nevertheless, our results hold for publicly traded targets in multivariate analysis.

We examine the information transmission role of stock recommendation revisions by sell-side security analysts. Revisions are associated with economically insignificant mean price reactions and often piggyback on recent news, events, long-term momentum, and short-run contrarian return predictors, typically downgrading after bad news and upgrading after good news. However, the revisions are usually information-free for investors. The findings go against the long-standing view that recommendations are an important means by which analysts assimilate information into stock prices. They disagree with the view of policymakers that analysts’ stock picks materially impact stock prices.

ABSTRACT We examine management discretion to decide when and how much to write down an asset, in a unique case where a tracking stock provides an observable market value for the asset. We find that, despite market evidence that Inco Ltd.'s financial statements substantially overvalued the Voisey's Bay nickel mine throughout 1997 to 2000, management chose not to write down the mine until 2002. Inco management used an independent fairness opinion to justify its December 2000 redemption of the tracking stock at 25% of its initial value, indicating almost surely that Inco management was aware of the generally accepted accounting principles (GAAP) impairment. This case illustrates that GAAP's reliance on undiscounted cash flows for impairment decisions allows huge unrecorded disparities between book and market value. The management discretion exercised in this case provides a concrete example of the subjectivity inherent in fair valuation.

Existing research shows that significantly more acquisitions occur when stock markets are booming than when markets are depressed. Rhodes-Kropf and Viswanathan (2004) hypothesize that firm-specific and market-wide valuations lead to an excess of mergers, and these will be value destroying. This article investigates whether acquisitions occurring during booming markets are fundamentally different from those occurring during depressed markets. We find that acquirers buying during high-valuation markets have significantly higher announcement returns but lower long-run abnormal stock and operating performance than those buying during low-valuation markets. We investigate possible explanations for the long-run underperformance and conclude it is consistent with managerial herding. The Author 2007. 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.

This paper empirically assesses the wage effects of the Job Corps program, one of the largest federally funded job training programs in the U.S. Even with the aid of a randomized experiment, the impact of a training program on wages is difficult to study because of sample selection, a pervasive problem in applied microeconometric research. Wage rates are only observed for those who are employed, and employment status itself may be affected by the training program. This paper develops an intuitive trimming procedure for bounding average treatment effects in the presence of sample selection. In contrast to existing methods, the procedure requires neither exclusion restrictions nor a bounded support for the outcome of interest. Identification results, estimators, and their asymptotic distribution are presented. The bounds suggest that the program raised wages, consistent with the notion that the Job Corps raises earnings by increasing human capital, rather than solely through encouraging work. The estimator is generally applicable to typical treatment evaluation problems in which there is nonrandom sample selection/attrition. Copyright Copyright © 2009 The Review of Economic Studies Limited.

Although the modern theory of financial intermediation portrays liquidity creation as an essential role of banks, comprehensive measures of bank liquidity creation do not exist. We construct four measures and apply them to data on virtually all U.S. banks from 1993 to 2003. We find that bank liquidity creation increased every year and exceeded $2.8 trillion in 2003. Large banks, multibank holding company members, retail banks, and recently merged banks created the most liquidity. Bank liquidity creation is positively correlated with bank value. Testing recent theories of the relationship between capital and liquidity creation, we find that the relationship is positive for large banks and negative for small banks.

The aim of this paper is to analyze how diversification of banks across size and industry affects risk, cost and profit efficiency, and bank capitalization for large Austrian commercial banks over the years 1997–2003. Employing a unique dataset, provided by the Austrian Central Bank, we test for several different types of managerial hypotheses, formalized according to a modified version of the Berger and DeYoung model [Berger, A.N., DeYoung, R., 1997. Problem loans and cost efficiency in commercial banks. Journal of Banking and Finance 21, 849–870]. We find that, although diversification negatively affects cost efficiency, it increases profit efficiency and reduces banks’ realized risk. Finally, diversification seems to have a positive impact on banks’ capitalization.

We present unique empirical tests for auction overbidding using data from Sweden's auction bankruptcy system. The main creditor (a bank) can neither bid in the auction nor refuse to sell in order to support a minimum price. However, we argue that the bank may increase its expected revenue by financing a bidder in return for a joint bid strategy, and we show that the optimal coalition bid exceeds the bidder's private valuation (overbidding) by an amount that is increasing in the bank's ex ante debt impairment. We find that bank–bidder financing arrangements are common, and our cross-sectional regressions show that winning bids are increasing in the bank-debt impairment as predicted. While, in theory, overbidding may result in the coalition winning against a more efficient rival bidder, our evidence on post-bankruptcy operating performance fails to support such allocative inefficiency effects. We also find that restructurings by bank-financed bidders are relatively risky as they have greater bankruptcy refiling rates, irrespective of the coalition's overbidding incentive.