Capital structure, Tax incentives, Dividends, Dividend reinvestment plan

The egalitarian wage policies of labor unions in the United States have been attributed to low-skilled majorities pursuing their self-interest in a majority rule environment. For this hypothesis to be more than a formalization of stylized facts requires evidence that unions are not egalitarian when the work place is not characterized.by a low-skilled majority. The author considers the impact of high-skilled majorities on (1) voting behavior in certification elections and (2) rent distribution policies in existing unions. Neither analysis supports the belief that union rent distribution policies are driven by skill-group coalitions pursuing their self-interests. Copyright 1992 by MIT Press.

The surge of interest in intergenerational transfers in the past decade has sparked a debate over the motivation for them. Are transfers given out of altruism or part of an exchange? While each motive is probably at work to some extent, they know little about whether one motive predominates. The question is relevant for issues concerning public income redistribution and inequality in the family but despite its importance, empirical evidence about motives is scarce because of limited data. They investigate a new data set, the National Survey of Families and Households, which remedies many of the shortcomings of other data sets containing private transfer information. They find that empirical patterns for inter-vivos transfers (i.e., transfers between living persons) are more consistent with exchange than altruism. Copyright 1992 by MIT Press.

Donald H. Dutkowsky, William G. Foote, Intertemporal Substitution in Macroeconomics: Consumption, Labor Supply, and Money Demand, The Review of Economics and Statistics, Vol. 74, No. 2 (May, 1992), pp. 333-338

This study investigates the returns to acquiring-firm stockholders in federally assisted mergers in the savings and loan industry. It is unique in that (a) these mergers are arranged and subsidized by government regulators and (b) they occur in a single industry, one plagued by well-publicized financial difficulties. The contribution of resources by the federal government creates the possibility of wealth transfers from the government to owners of the acquiring firms. We find, consistent with the oversubsidization hypothesis, that shareholders of acquiring firms earn significant positive returns.

Gerald R. Jensen, Donald P. Solberg, Thomas S. Zorn, Simultaneous Determination of Insider Ownership, Debt, and Dividend Policies, The Journal of Financial and Quantitative Analysis, Vol. 27, No. 2 (Jun., 1992), pp. 247-263

This paper considers a new class of heteroskedasticity and autocorrelation consistent (HAC) covariance matrix estimators. The estimators considered are prewhitened kernel estimators with vector autoregressions employed in the prewhitening stage. The paper establishes consistency, rate of convergence, and asymptotic truncated mean squared error (MSE) results for the estimators when a fixed or automatic bandwidth procedure is employed. Conditions are obtained under which prewhitening improves asymptotic truncated MSE. Monte Carlo results show that prewhitening is very effective in reducing bias, improving confidence interval coverage probabilities, and rescuing over-rejection of t-statistics constructed using kernel-HAC estimators. On the other hand, prewhitening is found to inflate variance and MSE of the kernel estimators. Since confidence interval coverage probabilities and over-rejection of t-statistics are usually of primary concern, prewhitened kernel estimators provide a significant improvement over the standard non-prewhitened kernel estimators.

Disclosures, Earnings announcements, Trading periods, Nontrading periods

Proper evaluation of cost-quality trade-offs inherent in regulatory policy requires identifying the structure of production from the behavioral response of quality to the policy change. However, estimating the structure of production with endogenous quality is difficult because of both measurement problems and data availability. We develop a simple method for identifying and estimating cost functions in the presence of endogenous and unobserved quality. Using this method, we estimate that a quality-adjusted cost function for nursing homes treating quality as exogenous yields seriously misleading estimates of marginal cost and economies of scale. We then used the parameter estimates to evaluate the cost-quality trade-off in nursing home regulatory policy.

[Previous research demonstrates that "brand name" (e.g., Big Eight versus non-Big Eight) is a factor affecting audit prices and auditor selection. As a quality surrogate, brand name reflects differences between auditor size categories in concern for reputation (DeAngelo 1981b) and the ability to withstand client pressure (Goldman and Barlev 1974). It has not, however, been demonstrated that these features characterize quality differences within an auditor size category. Although tests are difficult without a direct measure of quality, recent announcements by the General Accounting Office on CPA quality in governmental audits indicate a need to determine the factors that affect quality differences within auditor size categories, which is the subject of this study. Audit quality is defined as the probability that the auditor will both discover and report a breach in the client's accounting system (DeAngelo 1981a). Two explanations for variations in audit quality involve reputation and power conflict. Because an incumbent auditor captures client-specific quasi-rents, there is incentive to lower audit quality to retain the client. However, audit firm size is a moderating effect since a large client base allows a concern for reputation to remain more important than retention of any given client. The expectations are that (1) audit quality decreases as auditor tenure increases and (2) audit quality increases with the number of clients. In power conflicts, the client can exert pressure on the auditor to violate professional standards, and a large, financially healthy client can exert greater pressure with a threat of replacing the auditor. However, the established review of audit results or audit working papers by third parties can increase the auditor's ability to withstand client pressure. The expectations are that (3) audit quality is negatively related to the size and financial health of the firm and (4) audit quality improves when the auditor knows work will be subject to review by third parties and that sanctions for poor quality work will occur. This article presents the results of an investigation into the determinants of audit quality provided by small, independent CPA firms in Texas on audits of independent school districts. The study analyzes quality control review (QCR) findings to obtain a relatively more direct measure of audit quality. Between 1984 and 1989 the Audit Division of the Texas Education Agency (TEA) conducted 308 QCRs. Numerical scoring of 232 QCR letters of findings represents the measure of minimum audit quality and the dependent variable in the regression analysis. Explanatory variables associated with reputation effects, power conflict effects, report timeliness, audit hours, and reported breaches were obtained from TEA sources. The major finding of the study is that audit quality definitions (DeAngelo 1981b; Goldman and Barlev 1974) considered descriptive among audit size categories are sufficiently robust to explain quality variations within an audit size group. The results also confirm earlier studies relating audit quality to audit report timeliness (Dwyer and Wilson 1989) and actual audit hours (Palmrose 1986, 1989). We conclude that audit hours is a suitable surrogate for audit quality when direct measures are unavailable.]