"Revised April 1986."

Negative product-market shocks reduce wage growth and increase the probability of plant closing. There is a U-shaped relation between th is probability and job tenure that proxies the specific human capital that raises a firm's value. Estimates based on Panel Study of Income Dynamics data for 1977-81 generally support the model. They show that wages grow less rapidly among workers who will subsequently be displaced and imply that large wage concessions reduce the risk of pl ant closing only slightly. Copyright 1988 by MIT Press.

We examine the cost differences between public sales and private placements of debt for a sample of public utility issues. The lowest cost method depends on a firm's transaction costs which comprise flotation costs, agency costs, and the costs of searching the market. Our findings suggest that firms minimize the cost of issuing securities by selecting the market providing the lowest transaction costs.

Patricia J. Hughes, Eduardo S. Schwartz, The LIFO/FIFO Choice: An Asymmetric Information Approach, Journal of Accounting Research, Vol. 26, Studies on Management's Ability and Incentives to Affect the Timing and Magnitude of Accounting Accruals (1988), pp. 41-58

This paper examines the relation between the monitoring of CEOs by inside and outside directors and CEO resignations. CEO resignations are predicted using stock returns and earnings changes as measures of prior performance. There is a stronger association between prior performance and the probability of a resignation for companies with outsider-dominated boards than for companies with insider-dominated boards. This result does not appear to be a function of ownership effects, size effects, or industry effects. Unexpected stock returns on days when resignations are announced are consistent with the view that directors increase firm value by removing bad management.

This article suggests that the lack of use of rights offerings in the United States, a phenomenon referred to as the equity underwriting paradox, can be explained by transaction costs. A sample of underwritten rights offerings provides support for the explanation. Firms making underwritten rights offerings paid lower underwriter fees but incurred significantly larger price drops just prior to the offering than did firms making underwritten offerings. Further analysis reveals that the underwritten-rights-offering price concessions are a form of transaction cost that is not found in underwritten public offerings.

[The economic theory of regulation suggests that occupational licensing laws are enacted and administered to advance the interests of licensed practitioners. For example, grading standards on licensing examinations could be altered to protect incumbent practitioners from new competitors. This possibility is investigated with time series data of Uniform CPA Examination results for California and Illinois. The results indicate that when the exam was graded by the individual states, exam failure rates increased with downturns in economic activity (as measured by unemployment rates). However, the evidence shows no statistical relation between failure rates and economic activity in the years after each of the states adopted the AICPA's Advisory Grading Service.]

Abstract The economic theory of regulation suggests that occupational licensing laws are enacted and administered to advance the interests of licensed practitioners. For example, grading standards on licensing examinations could be altered to protect incumbent practitioners from new competitors. This possibility is investigated with time series data of Uniform CPA Examination results for California and Illinois. The results indicate that when the exam was graded by the individual states, exam failure rates increased with downturns in economic activity (as measured by unemployment rates). However, the evidence shows no statistical relation between failure rates and economic activity in the years after each of the states adopted the AICPA's Advisory Grading Service.