Empirical analysis reveals that investment-banker advisory fees in tender offers average 1.29% of the value of a completed transaction, far below the levels often alluded to in the business press. Most fees are contingent on offer outcome, with target-firm fees typically contingent on transaction value and bidding-firm fees on the number of shares purchased. Although these contingent contracts motivate investment bankers to satisfy some client objectives, many also create conflicts of interest between banker and firm. These incentive problems are apparent in offer evaluation, in hostile offers, and in the price paid by bidding firms.

This article examines the linkages between equity markets. The authors present a detailed analysis of the correlations between roughly coincident returns in different equity markets. They also uncover an intriguing fact: The volatility of the London stock market is higher than usual around the time when the NYSE opens. This may support their contagion theory, which argues that traders in one market draw inferences about shocks to share-price fundamentals from observed price movements in other markets. Even price moves which are not generated by fundamentals can therefore affect many markets. The findings raise two basic questions about the comovements in international equity markets. The first is whether there is any reason to expect the correlations across markets to be stable through time. This article emphasizes that returns on the London, New York, and Tokyo markets were more highly correlated around the market break of October 1987 than in other periods....

The "human capital earnings function," in which earnings are expressed as a quadratic in potential experience, is probably the most widely accepted empirical specification in economics. In spite of its widespread acceptance, the human capital earnings function provides a very poor approximation of the true empirical relationship between earnings and experience. The standard formulation understates early career earnings growth by about 30%-50% and overstates midcareer growth by 20%-50%. However, simple alternative specifications that fit the data are available.

This article builds and tests a model of the impact of a firm's bank-ruptcy probability on its propensity to offer deferred compensation schemes. Using 1983 Current Population Survey data, we find that, ceteris paribus, lower failure rates raise the incidence of pensions for nonunion workers outside manufacturing. Further, we find some evidence that, among those workers with a pension, a higher industry failure rate steepens tenure-earnings profiles (jointly controlling for union-nonunion and pension-no pension selectivity). Such a result suggests that workers discount implicit promises of future earnings increases by the likelihood that the firm will not survive.

We examine a general equilibrium model of asset prices in the presence of a simple informational imperfection. Assets are productive only when combined with managerial services. A manager “controls” an asset; he can conceal some of the output at a cost. This limits the extent to which managers can shed risk by issuing claims. Incentive compatibility drives a wedge, the “value of control”, between physical and financial asset values. Equilibrium allocations can be supported by alternative specifications of the right to “name the next manager”. If this right is assigned to holders of claims, then financial asset prices exhibit “excess volatility.”

This paper analyzes incentives for voluntary disclosure of proprietory information. Proprietory information, if disclosed, provides strategic information to potential competitors, but can be helpful to the financial market in valuing the firm more accurately. Focusing on a stylized model of a static entry game, we show that a fully revealing disclosure equilibrium exists when the prior of the market is optimistic or the entry cost is relatively low. When the prior is pessimistic or the entry cost is high, however, both non- and partial-disclosure equilibria obtain. Our analysis predicts that competition in the product market encourages voluntary disclosure.

Accounting-based dividend constraints in lending contracts are imperfect means of mitigating conflicts of interests between stockholders and bondholders since managers have flexibility to make accounting decisions to circumvent the covenants. This paper documents firms' accounting and dividend responses to an increase in the tightness of dividend constraints. Firms cut dividends and do not appear to make accounting changes to circumvent the dividend restriction. The magnitude of the dividend cut is proportional to the tightness of the dividend constraint. This suggests that accounting-based covenants are effective means for bondholders to restrict firmsś dividend policies.