ABSTRACT The purpose of this study is to investigate the relationship between return and yield in the context of ex ante data from The Value Line Investment Survey and by examining the role of dividends as a proxy for risk. The use of ex ante data should substantially reduce the confounding of tax and information effects that has affected earlier studies. Heteroscedasticity is detected in the after‐tax CAPM and found to be negatively related to yield and positively related to beta. Maximum likelihood methods are used to correct for heteroscedasticity and generate efficient coefficient estimates. Using data for each of the years 1973 through 1983, there is an overall positive relationship between expected return and yield. However, coefficient estimates of yield are highly variable from year to year.

The purpose of this study is to investigate the relationship between return and yield in the context of ex ante data from The Value Line Investment Survey and by examining the role of dividends as a proxy for risk. The use of ex ante data should substantially reduce the confounding of tax and information effects that has affected earlier studies. Heteroscedasticity is detected in the after-tax CAPM and found to be negatively related to yield and positively related to beta. Maximum likelihood methods are used to correct for heteroscedasticity and generate efficient coefficient estimates. Using data for each of the years 1973 through 1983, there is an overall positive relationship between expected return and yield. However, coefficient estimates of yield are highly variable from year to year.

How does trust affect business contracting at the firm level? We analyze the case of foreign high-tech companies investing in China, where the risk of expropriation of their intellectual property is high. We find that firms mitigate this type of risk by taking local trustworthiness into account when making investment decisions. Firms prefer to invest in regions where local partners and employees are considered more trustworthy; they are also more likely to establish joint ventures and to make greater research and development investments. We employ instrumental variable regressions and dynamic panel generalized method of moments estimators to alleviate endogeneity concerns and control for time-invariant heterogeneity.

A country's cumulative experience with statehood influences its ability to consolidate power and create a capable bureaucracy. Longer statehood experience gives countries more time to adapt their laws to local needs, provided the legal system is adaptable. We find that, relative to British common law countries with the most flexible laws, German and Scandinavian civil law countries initially exhibit lower financial development. However, as their history of statehood grows longer, financial development improves in countries with adaptable laws such as the German and Scandinavian civil law countries. This is not the case in French civil law countries with more rigid legal systems. Our results mainly show no or at most a weakly negative effect of French civil law legal origin on financial development. We also explore how changes in stock market development over time, financial integration, and financial crises are impacted by statehood experience, legal origins and their interaction.

It is well established in the literature that financial development (FD) is conducive to growth, and yet the channels through which FD affects growth are not well understood. Using a unique new panel data set for 21 OECD countries over the past 140 years, this paper examines the extent to which FD transmits to growth through ideas production, savings, fixed investment, and schooling. Unionization and agricultural share are used as instruments for FD. The empirical results show that FD influences growth through all four channels. In particular, ideas production is found to be the most important channel through which FD affects growth.

Using data for six Asian miracle economies over the period from 1953 to 2006, this paper examines the extent to which growth has been driven by R&D and tests which second-generation endogenous growth model is most consistent with the data. The results give strong support to Schumpeterian growth theory but only limited support to semi-endogenous growth theory. Furthermore, it is shown that R&D has played a key role for growth in the Asian miracle economies.

This study examines how a large sample of US banks compensates their top management teams (i.e., the top four to five highest ranking executives in each bank). We observe two tiers of compensation in the executive suite: the Chief Executive Officer (CEO) and the rest of the top management team. CEOs receive not only greater pay in absolute dollar, but are also rewarded more in relation to performance, as manifested in having a larger portion of their pay in performance contingent compensation. Below the CEO, top executives have similar compensation structure and pay to performance elasticities. The results are robust to a significant size effect, and alternate measures of performance.

Abstract Using a unique and rich database of high-technology firms in China, we show that effective enforcement of intellectual property rights at the provincial level is critical in encouraging financing and investing in R&D. Better enforcement of intellectual property (IP) rights positively affects firms' ability to acquire new external debt and allows firms to invest in more R&D, generate more innovation patents, and produce more sales from new products. Our results suggest that facilitating financing and investing in R&D are the channels through which better IP rights enforcement can affect economic growth.

ABSTRACT We provide evidence that taxes affect equity valuation by studying British investment trusts having otherwise identical classes of cash‐ and stock‐dividend‐paying shares outstanding. We study 1969–1982, a period in which there were two dramatic changes in tax policy. We find that stock‐dividend shares, which are convertible into cash‐dividend shares, sell at premiums when the tax system favors capital gains and at discounts when the tax advantage of capital gains is reduced. After the 1975 elimination of the tax advantage to stock‐dividend shares, we observe that investors convert virtually all stock‐dividend shares into cash‐dividend shares.

We provide evidence that taxes affect equity valuation by studying British investment trusts having otherwise identical classes of cash- and stock-dividend-paying shares outstanding. We study 1969–1982, a period in which there were two dramatic changes in tax policy. We find that stock-dividend shares, which are convertible into cash-dividend shares, sell at premiums when the tax system favors capital gains and at discounts when the tax advantage of capital gains is reduced. After the 1975 elimination of the tax advantage to stock-dividend shares, we observe that investors convert virtually all stock-dividend shares into cash-dividend shares.