Multi-store firms are common in the retailing industry. Theory suggests thatc ross-elasticities between stores of the same firm enhance market power. To evaluate the importance of this effect in the U.K. supermarket industry, we estimate a model of consumer choice and expenditure using three data sources:profit margins for each chain, a survey of consumer choices and a data-set of store characteristics. To permit plausible substitution patterns, the utility model interacts consumer and store characteristics. We measure market powerby calculating the effect of merger and demerger on Nash equilibriumprices. Demerger reduces the prices of the largest firms by between 2 and 3.8% depending on local concentration; mergers between the largest firms lead to price increases up to 7.4%. Copyright The Review of Economic Studies Limited, 2004.

We use a database of recent high tech IPOs to estimate opportunity cost of capital for venture capital investors and entrepreneurs. Entrepreneurs face the risk-return tradeoff of the CAPM as the opportunity cost of holding a portfolio that necessarily is underdiversified. For early stage firms, we estimate the effects of underdiversification, industry, and financial maturity on opportunity cost. Assuming a one-year holding period, the entrepreneur's opportunity cost generally is two to four times as high as that of a well-diversified investor. With a 4.0% risk-free rate and 6.0% market risk premium, for the sample average, we estimate the cost of capital of a well-diversified investor to be 11.4%, which equates to 16.7% before the management fees and carried interest of a typical venture capital fund. For an entrepreneur with 25% of total wealth invested in the venture, our corresponding estimate of cost of capital is 40.0%.

We examine Japan's 1997 introduction of book building as an alternative to a previously required hybrid auction method. Despite higher cost for some issuers, all issuers in Japan now select book building. Book building enables more accurate valuation of firms, but gains from accurate valuation are partly redistributive. Thus book building can drive auction-method offerings from the market even if it yields no aggregate benefit. Compared to the auction regime, book building reduces issue costs for large issuers. Auctioning is less costly for small issuers, but appears to foreclose some small firms from issuing. The aggregate costs of book building and auctioning are similar.

This article decomposes the participation process of a prototypical program into eligibility, awareness, application, acceptance, and enrollment. With this decomposition, we determine the sources of unequal participation for different groups and demonstrate that variables often have very different effects at different stages in the participation process. Our analysis shows that personal choices substantially affect participation and that awareness of program eligibility is a major source of variation in participation.

In an effort to improve the small sample properties of generalized method of mo-ments (GMM) estimators, a number of alternative estimators have been suggested. These include empirical likelihood (EL), continuous updating, and exponential tilt-ing estimators. We show that these estimators share a common structure, being members of a class of generalized empirical likelihood (GEL) estimators. We use this structure to compare their higher order asymptotic properties. We find that GEL has no asymptotic bias due to correlation of the moment functions with their Jacobian, eliminating an important source of bias for GMM in models with endo-geneity. We also find that EL has no asymptotic bias from estimating the optimal weight matrix, eliminating a further important source of bias for GMM in panel data models. We give bias corrected GMM and GEL estimators. We also show that bias corrected EL inherits the higher order property of maximum likelihood, that it is higher order asymptotically efficient relative to the other bias corrected estimators.

We examine Japan's 1997 introduction of book building as an alternative to a previously required hybrid auction method. Despite higher cost for some issuers, all issuers in Japan now select book building. Book building enables more accurate valuation of firms, but gains from accurate valuation are partly redistributive. Thus book building can drive auction-method offerings from the market even if it yields no aggregate benefit. Compared to the auction regime, book building reduces issue costs for large issuers. Auctioning is less costly for small issuers, but appears to foreclose some small firms from issuing. The aggregate costs of book building and auctioning are similar.

We posit that limited transparency of firms’ operations to outside investors increases demands on governance systems to alleviate moral hazard problems. We investigate how ownership concentration, directors’ and executive's incentives, and board structure vary with: (1) earnings timeliness, and (2) organizational complexity measured as geographic and/or product line diversification. We find that ownership concentration, directors’ and executives’ equity-based incentives, and outside directors’ reputations vary inversely with earnings timeliness, and that ownership concentration, and directors’ equity-based incentives increase with firm complexity. However, board size and the percentage of inside directors do not vary significantly with earnings timeliness or firm complexity.

We investigate corporate transparency, defined as the availability of firm‐specific information to those outside publicly traded firms. We conceptualize corporate transparency within a country as output from a multifaceted system whose components collectively produce, gather, validate, and disseminate information. We factor analyze a range of measures capturing countries' firm‐specific information environments, isolating two distinct factors. The first factor, interpreted as financial transparency, captures the intensity and timeliness of financial disclosures, and their interpretation and dissemination by analysts and the media. The second factor, interpreted as governance transparency, captures the intensity of governance disclosures used by outside investors to hold officers and directors accountable. We investigate whether these factors vary with countries' legal/judicial regimes and political economies. Our main multivariate result is that the governance transparency factor is primarily related to a country's legal/judicial regime, whereas the financial transparency factor is primarily related to political economy.

Over the past three decades the literature on financial distress prediction has largely been confined to simple multiple discriminant analysis, binary logistic or probit analysis, or rudimentary multinomial logit models (MNL). There has been a conspicuous absence of modeling innovation in this literature as well as a failure to keep abreast of important methodological developments emerging in other fields of the social sciences. In particular, there has been no recognition of major advances in discrete choice modeling over the last 15 years, which has increasingly relaxed behaviorally questionable assumptions associated with the independently and identically distributed errors (IID) condition and allowed for observed and unobserved heterogeneity. In contrast to standard logit, the mixed logit model fulfils this purpose and provides a superior framework for explanation and prediction. We explain the theoretical and econometric underpinnings of mixed logit and demonstrate its empirical usefulness in the context of a specific but topical area of accounting research: financial distress prediction. Comparisons of model-fits and out-of-sample forecasts indicate that mixed logit outperforms standard logit by significant margins. While mixed logit has valuable applications in financial distress research, its potential usefulness in other areas of accounting research should not be overlooked.

This paper uses evidence from a data set of 27 European IPOs to analyze how investors bid and the factors that influence their allocations. We also make use of a unique ranking of investor quality, associated with the likelihood of flipping the IPO. We find that investors perceived to be long‐term holders of the stock are consistently favored in allocation and in out‐turn profits. In contrast to Cornelli and Goldreich (2001) , we find little evidence that more informative bids receive larger allocations or higher profits. Our results cast doubt upon the extent of information production during the bookbuilding period.