This study is part of a larger project that was originally conceived to examine the communications function of economics journals for the period since 1890. Research was begun in 1967 and was continued intermittently in the intervening years. The materialfocusing on the periods 1961-64 and 1970-71 was drafted in preliminary form in 1972 and in final form in early 1974. Work dealing with the earlier years remains still in progress. I wish to give my thanks to the several persons whose research assistance was indispensible over the many years of the project. They include Lawrence Cavanagh, Frederick Garzino, Shirley Chiou, Roslind Diamond, and Robert McDougal. I am especially grateful to the editors and reviewers for their comments on the manuscript. The views expressed are those of the author and not of the Federal Reserve Bank of New York.

We consider a model in which the threat of bank liquidations by creditors as well as equity-based compensation incentives both discipline bankers, but with different consequences. Greater use of equity leads to lower ex-ante bank liquidity, whereas greater use of debt leads to a higher probability of inefficient bank liquidation. The bank's privately-optimal capital structure trades off these two costs. With uncertainty about aggregate risk, bank creditors learn from other banks’ liquidation decisions. Such inference can lead to contagious liquidations, some of which are inefficient; this is a negative externality that is ignored in privately-optimal bank capital structures. Thus, under plausible conditions, banks choose excessive leverage relative to the socially optimal level, providing a rationale for bank capital regulation. While a blanket regulatory forbearance policy can eliminate contagion, it also eliminates all market discipline. However, a regulator generating its own information about aggregate risk, rather than relying on market signals, can restore efficiency and market discipline by intervening selectively.

[We argue that when bankruptcy code is creditor friendly, excessive liquidations cause levered firms to shun innovation, whereas by promoting continuation upon failure, a debtorfriendly code induces greater innovation. We provide empirical support for this claim by employing patents as a proxy for innovation. Using time-series changes within a country and cross-country variation in creditor rights, we confirm that a creditor-friendly code leads to a lower absolute level of innovation by firms, as well as relatively lower innovation by firms in technologically innovative industries. When creditor rights are stronger, technologically innovative industries employ relatively less leverage and grow disproportionately slower.]

Journal Article Output and Investment for Exponential Growth in Consumption—The General Solution and Some Comments Get access V. Mukerji V. Mukerji Poona Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 31, Issue 1, January 1964, Pages 77–82, https://doi.org/10.2307/2295939 Published: 01 January 1964

Journal Article A Generalized S.M.A.C. Function with Constant Ratios of Elasticity of Substitution Get access V. Mukerji V. Mukerji Poona Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 30, Issue 3, October 1963, Pages 233–236, https://doi.org/10.2307/2296324 Published: 01 October 1963

In this article, I study the interaction between cost accounting systems and pricing decisions in a setting where a monopolist sells a base product and related support services to customers whose preference for support services is known only to them. I consider two pricing mechanisms—activity‐based pricing (ABP) and traditional pricing—and two cost‐accounting systems—activity‐based costing (ABC) and traditional costing, for support services. Under traditional pricing, only the base product is priced, whereas support services are provided free because detailed cost‐driver volume information on the consumption of support services by each customer is unavailable. Under ABP, customers pay based on the quantities consumed of both the base product and the support services because detailed cost‐driver volume information is available for each customer. Likewise, under traditional costing for support services the firm makes pricing decisions on cost signals that are noisier than they are under ABC. I compare the equilibrium quantities of the base product and support services sold, the information rent paid to the customers, and the expected profits of the monopolist under all four combinations of cost‐driver volume and cost‐driver rate information. I show that ABP helps reduce control problems, such as moral hazard and adverse selection problems, for the supplier and increases the supplier's ability to engage in price discrimination. I show that firms are more likely to adopt ABP when their customer base is more diverse, their customer support costs are more uncertain, their costing system has lower measurement error, and the variable costs of providing customer support are higher. Firms adopt ABC when their cost‐driver rates for support services under traditional costing are noisier measures of actual costs relative to their cost‐driver rates under ABC and when the actual costs of support services are inherently uncertain. I also show that cost‐driver rate information and cost‐driver volume information for support services are complements. Although the prior literature views ABC and activity‐based management (ABM) as facilitating better decision making, I show that ABC and ABP (a form of ABM) are useful tools for addressing control problems in supply chains.

Auditing, Auditor litigation, Rule 10b-5, Auditor liability