The mutual holding company (MHC) structure establishes a dual-class stock that creates a unique opportunity to transfer wealth from thrift depositor–owners to new minority shareholders through the disparate payment of dividends. We show that MHCs are priced higher than comparable non-MHCs and dividend policy is a significant component of this valuation. We also show that MHC thrifts pay significantly higher dividends than non-MHC thrifts and that an Office of Thrift Supervision (OTS) ruling reducing the potential for disparate dividends between the two classes of shareholders resulted in lower dividends. These results have policy implications of special significance given that the OTS reversed its position in 2000 and because of the current controversy over the use of the MHC structure in the financial service industry.

This paper examines determinants of Olympic success at the country level. Does the United States win its fair share of Olympic medals? Why does China win only 6% of the medals even though it has one-fifth of the world's population? We consider the role of population and economic resources in determining medal totals from 1960 to 1996. At the margin, population and income per capita have similar effects, suggesting that both a large population and high per capita GDP are needed to generate high medal totals. We also provide out-of-sample predictions for the 2000 Olympics in Sydney.

This paper presents an experiment that examines the effect of pro forma earnings disclosures on the judgments of analysts (i.e., more sophisticated investors) and nonprofessional (i.e., less sophisticated) investors. In the experiment, participants developed stock price assessments after reviewing background financial information and a current earnings announcement for a company. The earnings announcement was manipulated to report only GAAP earnings in one condition and both pro forma and GAAP earnings in the other condition. Consistent with empirical evidence, the pro forma earnings in our experiment exceeded GAAP earnings. The results indicate that nonprofessional investors who received an earnings announcement that contained both pro forma and GAAP disclosures assessed a higher stock price than did nonprofessionals who received an announcement containing only GAAP disclosures. Financial analysts' stock price judgments were not affected by the pro forma disclosures. Followup analyses suggest that analysts and nonprofessional investors used different valuation models and information processing. Analysts used well-defined valuation models, based on either earnings-multiples or cash flows, while the nonprofessional investors were more likely to use simpler, heuristic-based valuation models. The pro forma disclosure did not cause nonprofessional investors to assess a higher earnings number for determining a stock price, but rather caused nonprofessionals to perceive the earnings announcement as more favorable, which in turn caused them to convert earnings or some other performance metric into a higher stock price. This effect appears to be due to unintentional cognitive effects, rather than nonprofessionals relying on pro forma earnings information because they perceived it to be informative.

Nonexperimental data are used to evaluate impacts of a Bolivian preschool program on cognitive, psychosocial, and anthropometric outcomes. Impacts are shown to be highly dependent on age and exposure duration. To minimize the effect of distributional assumptions, program impacts are estimated as nonparametric functions of age and duration. A generalized matching estimator is developed and used to control for nonrandom selectivity into the program and into exposure durations. Comparisons with three groups—children in the feeder area not in the program, children in the program for ≤ 1 month, and children living in similar areas without the program—indicate that estimates are robust for significant positive effects of the program on cognitive and psychosocial outcomes with ≥ 7 months' exposure, although the age patterns of effects differ slightly by comparison group.

As the dominant provider of payments services, the efficiency with which the Federal Reserve provides such services is an important public policy issue. This paper examines the productivity of Federal Reserve check-processing offices during 1980–1999 using non-parametric estimation methods and newly developed methods for non-parametric inference and hypothesis testing. The results support prior studies that found little initial improvement in the Fed's efficiency with the imposition of pricing for Federal Reserve services in 1982. However, we find that median productivity improved substantially during the 1990s, and the dispersion of productivity across Fed offices declined.

We examine a sample of 8,313 cases, between 1951 and 2001, where firms unexpectedly increase their research and development (R&D) expenditures by a significant amount. We find consistent evidence of a misreaction, as manifested in the significantly positive abnormal stock returns that our sample firms' shareholders experience following these increases. We also find consistent evidence that our sample firms experience significantly positive long‐term abnormal operating performance following their R&D increases. Our findings suggest that R&D increases are beneficial investments, and that the market is slow to recognize the extent of this benefit (consistent with investor underreaction).

This study investigates the effect of shareholder capital gains taxes on the structure of corporate acquisitions. We analyze a sample of large publicly traded firms acquired in taxable cash-for-stock and tax-free stock-for-stock acquisitions from 1975 to 2000. We model acquisition structure (i.e., taxable cash-for-stock acquisitions versus tax-free stock-for-stock acquisitions) as a function of target shareholder capital gains taxes and other economic factors believed to influence acquisition structure. Consistent with expectations, we find a positive association between the capital gains tax rate for individual investors and the use of tax-free stock-for-stock acquisitions. In addition, we find that the effect of the capital gains tax rate for individuals decreases with target institutional ownership (a proxy that represents the likelihood the price-setting shareholder is not subject to the individual capital gains tax rate). We reconcile our analyses with previous studies and identify a plausible explanation for the lack of results in prior research. In supplemental analysis, we also report evidence that corporations “time” the completion of taxable acquisitions around major tax rate changes to minimize shareholder capital gains taxes. In sum, results suggest that shareholder-level taxes have a significant effect on the choice of taxable cash-for-stock versus tax-free stock-for-stock acquisitions, and this effect varies with the tax status of target shareholders.

We investigate the regulation of labor markets through employment, collective relations, and social security laws in 85 countries. We find that the political power of the left is associated with more stringent labor regulations and more generous social security systems, and that socialist, French, and Scandinavian legal origin countries have sharply higher levels of labor regulation than do common law countries. However, the effects of legal origins are larger, and explain more of the variation in regulations, than those of politics. Heavier regulation of labor is associated with lower labor force participation and higher unemployment, especially of the young. These results are most naturally consistent with legal theories, according to which countries have pervasive regulatory styles inherited from the transplantation of legal systems.

Multinational sales have grown at high rates over the last two decades, outpacing the remark-able expansion of trade in manufactures. Con-sequently, the trade literature has sought to incorporate the mode of foreign market access into the “new ” trade theory. This literature rec-ognizes that firms can serve foreign buyers through a variety of channels: they can export their products to foreign customers, serve them through foreign subsidiaries, or license foreign firms to produce their products. Our work focuses on the firm’s choice be-tween exports and “horizontal ” foreign direct investment (FDI). Horizontal FDI refers to an investment in a foreign production facility that

In early 1991, the Dutch pig-industry was struck by the so-called mystery swine disease. Large-scale laboratory investigations were undertaken to search for the etiological agent. We focused on isolating viruses and mycoplasmas, and we tested paired sera of affected sows for antibodies against ten known pig viruses. The mycoplasmas M. hyosynoviae, M. hyopneumoniae, and Acholeplasma laidlawii, and the viruses encephalomyocarditis virus and porcine enterovirus types 2 and 7 were isolated from individual pigs. An unknown agent, however, was isolated from 16 of 20 piglets and from 41 of 63 sows. This agent was characterised as a virus and designated Lelystad virus. No relationship between this virus and other viruses has yet been established. Of 165 sows reportedly afflicted by the disease, 123 (75 per cent) seroconverted to Lelystad virus, whereas less than 10 per cent seroconverted to any of the other virus isolates or to the known viral pathogens. Antibodies directed against Lelystad virus were also found in pigs with mystery swine disease in England, Germany, and in the United States. We conclude that infection with Lelystad virus is the likely cause of mystery swine disease.