This paper presents additional evidence on the relation between the investment opportunity set and financing, dividend, and compensation policies. Our results are based on a sample of 237 growth firms and 237 nongrowth firms. We find that growth firms have significantly lower debt/equity ratios and exhibit significantly lower dividend yields than nongrowth firms. We also find that growth firms pay significantly higher levels of cash compensation to their executives and have a significantly higher incidence of stock option plans than nongrowth firms. However, controlling for firm size, the incidence of bonus plans, performance plans, and restricted stock plans does not differ between growth and nongrowth samples.

This paper employs an agency model where a manager has a two-dimensional action choice to study how the information content of earnings affects the design of compensation contracts based on earnings and price. Price is modeled as an endogenous variable that reflects all available information, including earnings. Two settings are contrasted. In the first, earnings and price reflect the same underlying information about firm value, while in the second, earnings reflect a subset of the information reflected in price. It is shown that differences in information content substantially alter the characteristics of compensation contracts based on earnings and price.

We survey unemployment insurance (UI) in the United States and provide new evidence on the UI payroll tax. Most UI receipt is due to firms that pay part of the UI costs of their layoffs, but weak experience rating leads most firms to pay considerably less than the full costs. Industries consistently receiving subsidies from the UI system are construction, manufacturing, and mining. Finally, a large fraction of layoffs resulting in payment of UI are made by firms that are not charged for the costs of the claim because they have employed the individual for less than 2 quarters.

Three major motives have been suggested for takeovers: synergy, agency, and hubris. Existing empirical evidence is unable to clearly distinguish among these motives probably due to the simultaneous existence of all three in any sample of takeovers. This paper suggests a way of distinguishing among these competing hypotheses by looking at the correlation between target and total gains. It is argued that this correlation should be positive if synergy is the motive, negative if agency is the motive, and zero if hubris is the motive. The empirical results show that synergy is the primary motive in takeovers with positive total gains even though the evidence is consistent with the simultaneous existence of hubris in this sample. It is also found that agency is the primary motive in takeovers with negative total gains.

This study analyzes the effect of second-hand information on the behavior of security prices and volume using analysts' recommendations published in the monthly “Dartboard” column of the Wall Street Journal. For the two days following the publication of the recommendations, average positive abnormal returns of 4 percent—nearly twice the level of abnormal returns documented in previous research on analyst recommendations—and average volume double normal volume levels on the two days following publication of the recommendations are documented. The positive abnormal return on announcement is partially reversed within 25 trading days. The authors conclude that the positive abnormal return on announcement of the recommendations is a result of naive buying pressure as well as the information content of the analysts' recommendations.