NON-METROPOLITAN TO METROPOLITAN COUNTY COMMUTING: GATEWAY TO PROSPERITY OR BARBARIANS AT THE GATE

Labor and Human Capital,

A continuous model for dynamic pricing under costly price modifications

This paper presents a heuristic method to solve a dynamic pricing problem under costly price modifications. This is a remarkably difficult problem that is solvable only under very few special cases. The method is applied to a more general form of the problem and is numerically tested for a variety of demand functions in the literature. The results show that the method is quite accurate, approximating the optimal profit within usually much less than 1\%. A more important result is that the accuracy tend to be much greater as the number of price changes increases, precisely when the underlying optimization problem becomes much harder, which makes this approach particularly desirable

Private Equity Firms\u27 Reputational Concerns and the Costs of Debt Financing

A popular view is that private equity (PE) firms tend to expropriate other stakeholders of their portfolio companies. Bonds offered during 1992-2011 by companies after their initial public offerings (IPOs) do not reflect this view. We find that yield spreads on bonds offered by PE-backed companies are on average 70 basis points lower, holding other things constant. We also find that PE-backed companies have more conservative investment and dividend policies after bond offerings compared to non-PE-backed companies. These results suggest that PE firms’ reputational concerns dominate their wealth expropriation incentives and help their portfolio companies reduce the costs of debt

Information Opacity, Credit Risk, and the Design of Loan Contracts for Private Firms

This paper examines the structure and cost of a large sample of bank loans to private firms. Compared to public firms, private firms are more informationally opaque and riskier. The results suggest that the design of a loan to a private firm is significantly different from that to a public firm. Bank loans to private firms are more likely to be by a sole lender, collateralized, and have sweep covenants than loans to public firms. The cost of borrowing is higher for a private firm than for a public firm, even after holding constant firm and loan characteristics

Intangible Investments and the Pricing of Corporate SGA Expenses

This study examined whether the market fully prices the reported Selling, General, and Administrative (SGA) expenses when this item includes an intangible investment component. For a sample of intangible investment-intensive firms, we showed that their SGA expenses benefit future operating performances. Evidence suggests some degree of market inefficiency in the pricing of SGA expenses and the intangible investment component. Furthermore, the financial analysts do not appear to appreciate fully the future benefits of the component in their earnings forecasts. Finally, the pertinent disclosures in firms’ annual reports are so inadequate as to attenuate the market mispricing, suggesting a significant room for future improvement

A continuous approximation method for dynamic pricing problem under costly price modifications

This paper presents a heuristic method to solve a dynamic pricing problem under costly price modifications. This is an extremely difficult nonlinear problem that has been solved only for a few special instances. Here we provide a new approach that involves an approximate reformulation of the problem, which can subsequently be solved in closed-form using elementary calculus techniques. Numerical results show that the approach is quite accurate; approximating the optimal revenue with errors usually much less than 1\%. Moreover, the accuracy rapidly improves as the optimal number of price changes increases, which are precisely the cases conventional approaches would fail

Managing Underwriters and the Marketing of Seasoned Equity Offerings

Using a sample of 2,281 SEOs from 1995-2004, we show that the marketing of securities is important to issuers. The number of managing underwriters for an SEO is negatively related to the offer price discount, especially when the relative offer size is large and the stock return volatility is high. Larger investor networks of co-managing underwriters also lower offer price discounts. We argue that the evidence is supportive of the marketing hypothesis - the underwriters\u27 marketing efforts can lower the offer price discount by shifting up and flattening the demand curve of an SEO

Comparison of Condorcet and Weber solutions on a plane

International audienceno abstrac

Testing Theories of Capital Structure and Estimating the Speed of Adjustment

This paper examines time-series patterns of external financing decisions and shows that publicly traded U.S, firms fund a much larger proportion of their financing deficit with external equity when the cost of equity capital is low. The historical values of the cost of equity capital have long-lasting effects on fimis capital structures through their influence on firms\u27 historical financing decisions. We also introduce a new econometric technique This paper examines time-series patterns of external financing decisions and shows that publicly traded U.S. firms fund a much larger proportion of their financing deficit with external equity when the cost of equity capital is low. The historical values of the cost of equity capital have long-lasting effects on firms\u27 capital structures through their influence on firms\u27 historical financing decisions. We also introduce a new econometric technique to deal with biases in estimates of the speed of adjustment toward target leverage. We find that firms adjust toward target leverage at a moderate speed, with a half-life of 3.7 years for book leverage, even after controlling for the traditional determinants of capital structure and firm fixed effects. [ABSTRACT FROM AUTHOR] Copyright of Journal of Financial & Quantitative Analysis is the property of Cambridge University Pres