A Fast Literature Search Engine based on top-quality journals, by Dr. Mingze Gao.

• Christie, W. G., & Nanda, V. (1994). Free Cash Flow, Shareholder Value, and the Undistributed Profits Tax of 1936 and 1937. The Journal of Finance, 49, 1727–1754.

  In 1936, the federal government unexpectedly imposed a tax on undistributed corporate profits. Despite the direct costs of the tax, its announcement produced a positive revaluation of corporate equity, particularly among lower-payout firms. The authors interpret this as evidence of a divergence between managerial and shareholder preferences regarding dividend payout policies, consistent with the presence of agency costs. They also find that, despite the incentives created by the tax, the actual growth in dividends during 1936 was lower among firms judged more likely to be subject to higher agency costs after controlling for liquidity, debt, and the growth in earnings.

• Christie, W. G., & Schultz, P. H. (1994). Why Do Nasdaq Market Makers Avoid Odd-Eighth Quotes? The Journal of Finance, 49, 1813–1840.

  The NASDAQ multiple dealer market is designed to produce narrow bid-ask spreads through the competition for order flow among individual dealers. However, the authors find that odd-eighth quotes are virtually nonexistent for 70 of 100 actively traded NASDAQ securities, including Apple Computer and Lotus Development. The lack of odd-eighth quotes cannot be explained by the negotiation hypothesis of L. Harris (1991), trading activity, or other variables thought to impact spreads. This result implies that the inside spread for a large number of NASDAQ stocks is at least $0.25 and raises the question of whether NASDAQ dealers implicitly collude to maintain wide spreads.

• Cockburn, I., & Griliches, Z. (1994). Generics and New Goods in Pharmaceutical Price Indexes. American Economic Review, 84, 1213–1232.

  When the patent on a drug expires, there are substantial welfare gains to those consumers who, like the Food and Drug Administration, regard branded and generic versions as perfect substitutes. Standard price indexes fail to reflect this, since they treat generics as distinct new goods and 'link them in' with fixed weights. Alternative calculations are presented using detailed data on the wholesale prices of two anti-infective drugs. Significant differences are found: for one of the drugs studied, the standard price index rose by 14 percent over forty-five months following patent expiration, while the authors' preferred alternative index fell by 48 percent. Copyright 1994 by American Economic Association.

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• Cook, D. O., & Easterwood, J. C. (1994). Poison Put Bonds: An Analysis of Their Economic Role. The Journal of Finance, 49, 1905–1920.

  This article examines the effect of issuing debt with and without 'poison put' covenants on outstanding debt and equity claims for the period 1988 to 1989. The analysis shows that poison put covenants affect stockholders negatively and outstanding bondholders positively, while debt issued without such covenants has no effect. The study also finds a negative relationship between stock and bond returns for firms issuing poison put debt. These results are consistent with a 'mutual interest hypothesis,' which suggests that the issuance of poison put debt protects managers and, coincidentally, bondholders at the expense of stockholders.

• Davis, J. L. (1994). The Cross-Section of Realized Stock Returns: The Pre-Compustat Evidence. The Journal of Finance, 49, 1579–1593.

  Using a database that is free of survivorship bias, this article finds that book-to-market equity, earnings yield, and cash flow yield have significant explanatory power with respect to the cross-section of realized stock returns during the period from July 1940 through June 1963. There is a strong January seasonal in the explanatory power of these variables, even though small stocks are, by construction, excluded from the sample.

• Demougin, D., & Siow, A. (1994). Careers in Ongoing Hierarchies. American Economic Review, 84, 1261–1277.

  The probability that an unskilled worker can be successfully trained or screened to be a manager depends on the effort of the firm. With positive hiring costs, a firm prefers to train/screen its own managers. However, the optimal size of the firm for productive efficiency may conflict with efficient managerial husbandry. How a firm copes with the above constraint generates stochastic layoffs, lateral mobility, promotions, diverse earnings profiles, fast-track jobs, and up-or-out rules. Copyright 1994 by American Economic Association.

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• Denis, D. J., & Kadlec, G. B. (1994). Corporate Events, Trading Activity, and the Estimation of Systematic Risk: Evidence From Equity Offerings and Share Repurchases. The Journal of Finance, 49, 1787–1811.

  The authors investigate the relation between trading activity, the measurement of security returns, and the evolution of security prices by examining estimates of systematic risk surrounding equity offerings and share repurchases. In contrast to prior studies, they find no evidence of changes in systematic risk following either equity offerings or share repurchases after correcting for biases caused by infrequent trading and price adjustment delays. Moreover, changes in ordinary least squares beta estimates are significantly related to contemporaneous changes in trading activity. The authors' results have implications for studies interested in the properties of security returns, particularly those examining periods in which trading activity changes.

• Eades, K. M., Hess, P. J., & Kim, E. H. (1994). Time-Series Variation in Dividend Pricing. The Journal of Finance, 49, 1617–1638.

  Ex-dividend day returns vary over time. The ex-day returns of high-yield stocks are persistently positive for some time periods and negative for others; in contrast, ex-day returns of low-yield stocks are always positive and less variable. The authors are unable to explain the variation with changes in the tax code but they do find a strong effect for the introduction of negotiated commissions. The authors find evidence that corporate dividend capturing is affecting ex-day returns and confirm the findings of R. H. Gordon and D. F. Bradford (1980) that the price of dividends is countercyclical.

• Gale, W. G., & Scholz, J. K. (1994). IRAs and Household Saving. American Economic Review, 84, 1233–1260.

  This paper examines the effects of Individual Retirement Accounts (IRAs) on private and national saving. The authors construct a formal model of dynamic utility maximization that generates closed-form equations for IRA and other saving. Their empirical estimates indicate that raising the annual IRA contribution limit between 1983 and 1986 would have resulted in little, if any, increase in national saving. Results from sensitivity analysis imply substantially smaller effects on national saving than most previous researchers have estimated. The authors' results are consistent with new evidence they present indicating considerable potential among IRA holders to shift taxable forms of saving into IRAs. Copyright 1994 by American Economic Association.

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• Garfinkel, M. R. (1994). Domestic Politics and International Conflict. American Economic Review, 84, 1294–1309.

  This paper explores the interactions between domestic politics and international conflict. The analysis shows that electoral uncertainty associated with competition between political parties, each representing a specific group of the electorate, imparts a negative 'bias' on the nation's military spending, given military spending by other nations. In turn, electoral uncertainty lowers other nations' incentive to arm as well. In this context, democratic institutions can be thought of as a possible 'precommitment' mechanism that reduces the severity of conflict between nations and, thereby, increases the amount of resources available globally for consumption. Copyright 1994 by American Economic Association.

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