Reviews the book `Rewarding Results: Motivating Profit Center Managers,' by Kenneth A. Merchant.

This study investigates the incentives of financially distressed firms to restructure their debt privately rather than through formal bankruptcy. In a sample of 169 financially distressed companies, about half successfully restructure their debt outside of Chapter 11. Firms more likely to restructure their debt privately have more intangible assets, owe more of their debt to banks, and owe fewer lenders. Analysis of stock returns suggests that the market is also able to discriminate ex ante between the two sets of firms, and that stockholders are systematically better off when debt is restructured privately.

In this paper, the authors investigate the effects of relative price variability on output and the stock market, and gauge the extent to which inflation proxies for relative price variability in stock-return-inflation regressions. The evidence shows that the negative stock-return-inflation relations proxy for the adverse effects of relative price variability on economic activity, particularly during the 1970s, when the United States experienced oil supply shocks. Hence, it appears that inflation spuriously affects the stock market in two ways: the aggregate output link of E. F. Fama (1981) and the supply shocks reflected in relative price variability.

Previous studies of owner-occupied housing typically ignore the taxation of capital gains because homeowners do not pay a capital gains tax if they buy up when they move. However, the capital gains tax code introduces a kink into the budget constraint of most previous homeowners, causing previous owners to face a different price of housing depending on whether they buy up or down. We control for the kinked budget constraint within a maximum likelihood model of owner-occupied housing demand. Results indicate that failure to model the capital gains tax provisions leads to inefficient estimates of the elasticities of demand. However, controlling for the kink did not lead to statistically different coefficient estimates relative to a linear budget constraint model.

This paper examines the impact of bank adoptions of automated teller machines (ATMS) on subsequent levels of concentration in local banking markets. The findings suggest that banks have had some success in using ATMs to attract customers from competitors. As a consequence, technology adoption's impact on market structure depends upon whether it is the larger or smaller firms within the market that adopt the new technology. Large firm adoptions increase concentration levels, while small firm adoptions tend to reduce them. The evidence also suggest that a state of structural disequilibrium seems to be characteristic of banking markets.

This study tests the hypothesis that price expectations differ across individuals because they acquire different information about inflation. If price information is a normal good, then the amount of price information acquired will vary across individuals according to income, education, and other demand-specific variables, causing price expectations to be heteroscedastic with respect to these variables. Utilizing monthly household survey data, the authors test the heteroscedasticity hypothesis and find support for the differential information model. In addition, they develop a novel method of incorporating the "don't know" response to questions about inflation into the estimation of price expectations.