This paper analyzes the capital structures of foreign affiliates and internal capital markets of multinational corporations. Ten percent higher local tax rates are associated with 2.8% higher debt/asset ratios, with internal borrowing being particularly sensitive to taxes. Multinational affiliates are financed with less external debt in countries with underdeveloped capital markets or weak creditor rights, reflecting significantly higher local borrowing costs. Instrumental variable analysis indicates that greater borrowing from parent companies substitutes for three‐quarters of reduced external borrowing induced by capital market conditions. Multinational firms appear to employ internal capital markets opportunistically to overcome imperfections in external capital markets.

We exploit cross‐temporal differences in capital gains tax rates to test whether shareholder‐level capital gains taxes are associated with higher acquisition premiums for taxable acquisitions. We model acquisition premiums as a function of proxies for the capital gains taxes of target shareholders, taxability of the acquisition, and tax status of the price‐setting shareholder as represented by the level of target institutional ownership. Consistent with a lock‐in effect for acquisition premiums, results suggest a unique positive association between shareholder capital gains taxes for individual investors and acquisition premiums for taxable acquisitions, which is mitigated by target institutional ownership.

The Geske–Johnson approach provides an efficient and intuitively appealing technique for the valuation and hedging of American‐style contingent claims. Here, we generalize their approach to a stochastic interest rate economy. The method is implemented using options exercisable on one of a finite number of dates. We illustrate how the value of an American‐style option increases with interest rate volatility. The magnitude of this effect depends on the extent to which the option is in the money, the volatilities of the underlying asset and the interest rates, as well as the correlation between them.

The Geske–Johnson approach provides an efficient and intuitively appealing technique for the valuation and hedging of American-style contingent claims. Here, we generalize their approach to a stochastic interest rate economy. The method is implemented using options exercisable on one of a finite number of dates. We illustrate how the value of an American-style option increases with interest rate volatility. The magnitude of this effect depends on the extent to which the option is in the money, the volatilities of the underlying asset and the interest rates, as well as the correlation between them.

We test the hypothesis that when their compensation is linked to relative performance, managers of investment portfolios likely to end up as will manipulate fund risk differently than those managing portfolios likely to be An empirical investigation of the performance of 334 growth-oriented mutual funds during 1976 to 1991 demonstrates that mid-year losers tend to increase fund volatility in the latter part of an annual assessment period to a greater extent than mid-year winners. Further, we show that this effect became stronger as industry growth and investor awareness of fund performance increased over time.

A cash-in-advance model of a monetary economy is used to derive a money-based CAPM (M-CAPM), which allows us to implement tests of asset pricing restrictions without consumption data. A test as in Fama and MacBeth of the model suggests that the money betas have some explanatory power for the cross-sectional variation of expected returns; however, the model is rejected using conditional information. Consistent with our predictions, estimates of the curvature parameter are lower than those of the consumption CAPM (C-CAPM) and pricing errors of the M-CAPM tend to be smaller than those of the C-CAPM.

We test the hypothesis that when their compensation is linked to relative performance, managers of investment portfolios likely to end up as “losers” will manipulate fund risk differently than those managing portfolios likely to be “winners.” An empirical investigation of the performance of 334 growth‐oriented mutual funds during 1976 to 1991 demonstrates that mid‐year losers tend to increase fund volatility in the latter part of an annual assessment period to a greater extent than mid‐year winners. Furthermore, we show that this effect became stronger as industry growth and investor awareness of fund performance increased over time.

This study compares the pre and postprivatization financial and operating performance of 61 companies from 18 countries and 32 industries that experience full or partial privatization through public share offerings during the period 1961 to 1990. Our results document strong performance improvements, achieved surprisingly without sacrificing employment security. Specifically, after being privatized, firms increase real sales, become more profitable, increase their capital investment spending, improve their operating efficiency, and increase their work forces. Furthermore, these companies significantly lower their debt levels and increase dividend payout. Finally, we document significant changes in the size and composition of corporate boards of directors after privatization.

This study compares the pre and postprivatization financial and operating performance of 61 companies from 18 countries and 32 industries that experience full or partial privatization through public share offerings during the period 1961 to 1990. Our results document strong performance improvements, achieved surprisingly without sacrificing employment security. Specifically, after being privatized, firms increase real sales, become more profitable, increase their capital investment spending, improve their operating efficiency, and increase their work forces. Furthermore, these companies significantly lower their debt levels and increase dividend payout. Finally, we document significant changes in the size and composition of corporate boards of directors after privatization.

We provide evidence that the spread between commodity spot and futures prices (the basis) reflects the macroeconomic risks common to all asset markets. The basis of many commodities is correlated with the stock index dividend yield and corporate bond quality spread. Explanatory power is related to exposure to macroeconomic fluctuations: about 40 percent of the variation in the basis of a portfolio of commodities with high business cycle sensitivity is explained by the stock and bond yields. Further diagnostics indicate that these associations are largely due to the presence of risk premiums, rather than spot price forecasts, in the basis.