The 1918–47 employee records of the Ford Motor Company provide a rare opportunity to study a firm willing to hire black workers when similar firms would not. The evidence suggests that Ford did profit from discrimination elsewhere, but not by paying blacks less than whites. An apparent “wage‐equity constraint” prevailed, resulting in virtually no racial variation in wages inside Ford. An implication was that blacks quit Ford jobs less often than whites, holding working conditions constant. Arbitrage profit came from exploiting this nonwage margin, as Ford placed blacks in hot, dangerous foundry jobs where quit rates were generally high.

We value a firm that pays its cash flows to equity through share repurchases in a dynamic environment where personal taxes are paid on capital gains upon realization. The cost of capital is reduced by approximately 0.8% through the use of repurchases relative to dividends. We use the empirical distribution of pre-tax free cash flows in Fama and French (1999) to evaluate the tradeoffs between the costs of financial distress, the personal-tax advantages of equity, and the corporate-tax advantage to debt. The optimal capital structure is interior with a 3% bankruptcy cost.

We develop a theory of market crashes based on differences of opinion among investors. Because of short-sales constraints, bearish investors do not initially participate in the market and their information is not revealed in prices. However, if other previously bullish investors bail out of the market, the originally bearish group may become the marginal "support buyers," and more will be learned about their signals. Thus accumulated hidden information comes out during market declines. The model explains a variety of stylized facts about crashes and also makes a distinctive new prediction—that returns will be more negatively skewed conditional on high trading volume.

Abstract This paper explores whether analyst forecasts impound the earnings management to avoid losses and small earnings decreases documented in Burgstahler and Dichev 1997, whether analysts are able to identify which specific firms engage in such earnings management, and the implications for significant forecast error anomalies at zero earnings and zero forecast earnings. We use data from Zacks Investment Research 1999 and find that analysts anticipate earnings management to avoid small losses and small earnings decreases. Further, analysts are much more likely to forecast zero earnings than firms are to realize zero earnings, and analysts are unable to consistently identify the specific firms that engage in earnings management to avoid small losses. This latter inability contributes to significant forecast pessimism associated with zero reported earnings and significant forecast optimism associated with zero earnings forecasts.

We find that executives who jump to chief executive officer (CEO) positions at new employers come from firms that exhibit above-average stock price performance. This relationship is more pronounced for more senior executives. No such relationship exists for jumps to non-CEO positions. Stock options and restricted stock do not appear to significantly affect the likelihood of jumping ship, but the existence of an "heir apparent" on the management team increases the likelihood that executives will leave for non-CEO positions elsewhere. Hiring grants used to attract managers are correlated with the equity position forfeited at the prior employer and with the prior employer's performance.

We examine the link between the excess value of a diversified firm and the value of its internal capital market. Subsidies to small financially constrained segments with good relative investment opportunities significantly increase excess value, while transfers of resources from segments with good relative investment opportunities significantly decrease excess value. Of interest is that subsidies to small financially constrained segments with poor relative investment opportunities also significantly increase excess value. However, there is little evidence that this result depends on the diversity of a firm's investment opportunities. We conclude that financing constraints drive the relationship between the internal capital market and firm value.

We construct a model where the reputational concern of the long-run player to look good in the current period results in the loss of all surplus. This is in contrast to the bulk of the literature on reputations where such considerations mitigate myopic incentive problems. We also show that in models where all parties have long-run objectives, such losses can be avoided.

Since the publication (1976) of the classic Lucas critique, researchers in empirical macroeconomics have endeavored to specify models that capture the underlying dynamic decision-making behavior of consumers and firms who require forecasts of future events. Recently, a number of researchers have developed simple models that have become the workhorses for monetary policy analysis. The models vary considerably with regard to optimizing foundations and explicit treatment of expectations. However, relatively little effort has been devoted to testing the empirical importance of the Lucas critique for these simple models. Can one find specifications that are policy-invariant? This paper develops and implements a set of tests for several monetary policy models used extensively in the literature. In particular, we attempt to test the robustness of optimizing versus nonoptimizing models to changes in the monetary policy regime. We present evidence that shows that some forward-looking models from the recent literature may be less stable than their better-fitting backward-looking counterparts.

This essay examines interconnections between "race" and economic inequality in the United States, focusing on the case of African-Americans. I will argue that it is crucially important to distinguish between racial discrimination and racial stigma in the study of this problem. Racial discrimination has to do with how blacks are treated, while racial stigma is concerned with how black people are perceived. My view is that what I call reward bias (unfair treatment of persons in formal economic transactions based on racial identity) is now a less significant barrier to the full participation by African-Americans in U.S. society than is what I will call development bias (blocked access to resources critical for personal development but available only via non-market-mediated social transactions). By making these points in the specific cultural and historical context of the black experience in U.S. society, I hope to contribute to a deeper conceptualization of the worldwide problem of race and economic marginality.