Wayne Y. Lee, Kanwal S. Sachdeva, The Role of the Multinational Firm in the Integration of Segmented Capital Markets, The Journal of Finance, Vol. 32, No. 2, Papers and Proceedings of the Thirty-Fifth Annual Meeting of the American Finance Association, Atlantic City, New Jersey, September 16-18, 1976 (May, 1977), pp. 479-492

The recent literature on firm behavior has been characterized by two contrasting strands of analysis: on the one hand, there is the literature attempting to extend the conventional maxims of profit maximization of competitive firms from the familiar static models to dynamic contexts and into situations of uncertainty. These analyses argue that firms should maximize their stock market value and explore the implications of this for firm behavior. On the other hand, there is the vast and growing "managerial" literature, in which other objectives, such as "satisficing," "sales maximizing," and "maximization of the manager's utility functions" are postulated. The second group of analyses criticize the first as being unrealistic, while the first argues that it provides the best "first approximation" to firm behavior: if firms did not maximize their stock market value, or deviated far from value maximization, someone would attempt to take them over, change the course of action of the firm, and make a pure capital gain. This paper presents a unified framework for analyzing firm behavior which can be used to reconcile these divergent views.

The potential of monetary policy to stabilize fluctuations in output and employment is demonstrated in a stochastic rational expectations model in which firms choose, considering average profitability, to set prices in advance of the period when they apply to goods sold. This lead time in pricing decisions increases the fluctuations of output about the normal employment level. But proper use of a feedback monetary policy rule can reduce these fluctuations even though expectations are rational and people know the policy rule. It is noted that use of a rule-dictated policy sometimes requires the monetary authorities to penalize the economy in the short run for the sake of beneficial system effects of the rule upon the relevant steady-state distributions.

Michael J. Brennan, Eduardo S. Schwartz, The Valuation of American Put Options, The Journal of Finance, Vol. 32, No. 2, Papers and Proceedings of the Thirty-Fifth Annual Meeting of the American Finance Association, Atlantic City, New Jersey, September 16-18, 1976 (May, 1977), pp. 449-462