Decentralized Investment Banking: The Case of Discount Dividend-Reinve stment and Stock-Purchase Plans

Discount dividend-reinvestment and stock-purchase plans allow shareholders to capture part of the underwriting fees incurred in new stock offerings and save sponsoring firms some of the usual underwriting costs. We tested the degree to which individual investors can profitably serve this investment banking function by implementing simple investment/trading strategies designed to capture the discounts and distribute the shares in the market. The large profits earned by our strategies raise serious questions about why it takes firms so long to raise the target level of capital and why many eligible shareholders do not participate in these discount plans.

Employee Stock Ownership Plans and Corporate Restructuring: Myths and Realities

During the first six months of 1989 U.s. corporations acquired over $19 billion of their own stock to establish employer stock ownership plans (ESOPs). We evaluate the common claims that there exist unique tax and incentive contracting advantages to establishing ESOPs. Our analysis suggests that, particularly for large firms, where the greatest growth in ESOPs has occurred, the case is very weak for taxes being the primary motivation to establish an ESOP. The case is also weak for employee incentives being the driving force behind their establishment. We conclude that the main motivation for the growth of ESOPs is their anti-takeover characteristics.

The Effects of Changes in Tax Laws on Corporate Reorganization Activity

We present evidence that changes in tax laws passed in the 1980s, culminating with the Tax Reform Act of 1986, had a first order effect on observed merger and acquisition activity in the US. We also present evidence of increased reliance on certain institutional arrangements (unit management buyouts and going-private transactions) used to effect mergers and acquisitions that were designed to reduce the nontax costs of transacting, thereby enabling tax benefits to be realized in a larger number of mergers and acquisitions than might otherwise have occurred. We begin with a "closed-economy" perspective, focusing on the effects of changes in tax laws on the demand for mergers and acquisitions of us corporations by US corporations. We then broaden the scope of inquiry by modeling and testing the effects of changes in tax laws on the demand for mergers and acquisitions of US corporations by foreign multinationals. Here we predict and present confirmatory evidence that while the 1986 Tax Act discouraged transactions among US corporations, it increased the demand for merger and acquisition transactions between US sellers and foreign buyers.

Converting Corporations to Partnerships through Leverage: Theoretical and Practical Impediments

We explore the degree to which debt financing can reduce the corporate-level tax on income in the U.S.. Although we show that debt is capable of shielding the competitive rate of return on projects from the corporate-level tax, debt financing cannot shield the positive net present value portion of project returns. Since nontax factors preclude corporate activities from being 100% debt-financed, a portion of the competitive return to corporate activity is also subject to double taxation. We also consider alternative mechanisms that serve to convert the corporate tax to a personal tax (or a partnership tax). These include other claims that give rise to tax deductible payments to the corporation such as obligations to employees, lessors and suppliers. As we show, all of these alternatives are limited in their ability to eliminate the corporate-level tax.

How Investors Can (and Can\u27t) Create Social Value

Most investors throughout the world have a single goal: to earn the highest risk- adjusted financial returns. They would not accept a lower financial return from an investment that also produced social benefits. More recently, an increasing number of socially-motivated investors have goals beyond maximizing returns. They also seek to align their investments with their social values (value alignment), and some also seek to cause the companies in which they invest to create more social value as a result of their investment (social value creation). We show in this essay that while it is relatively easy to achieve value alignment, creating social value is far more difficult

Geographic clustering of underage drinking and the influence of community characteristics

The aim of this paper was to examine the extent to which underage drinking clusters geographically in a sample of communities, and to investigate the manner in which community-level contexts are related to this process. We used data from a randomized community trial of underage drinking to provide the first quantitative estimates of the magnitude of the geographic clustering of underage drinking based upon pairwise odds ratios (PWORs). The Enforcing Underage Drinking Laws Randomized Community Trial provided data from repeated cross-sectional samples of youth aged 14-20 from 68 communities surveyed in 2004, 2006, and 2007 (n=18, 730). Past 30-day drinking, binge drinking, getting drunk, experiencing non-violent consequences as a result of drinking and making a purchase attempt all significantly clustered within-communities with PWORs ranging from 1.05 to 1.21. After adjustment for individual-level characteristics, results remained relatively unchanged. However, there was evidence that the magnitude of the clustering varied as a function of neighborhood disadvantage, neighborhood disorder, and family structure. Clustering of drunkenness and experiencing non-violent consequences as a result of drinking was greatest in the least economically disadvantaged and least disordered communities with the greatest percentage of married couple families. The clustering of making a purchase attempt, however, was greatest in more disordered communities, specifically the largest communities with the highest degree of residential mobility and housing density. These findings that clustering of underage drinking behaviors varies by community context has the potential for identifying the types of communities to target for underage drinking behavior-specific preventive interventions

Sample size estimation for alternating logistic regressions analysis of multilevel randomized community trials of under-age drinking

Under-age drinking is an enormous public health issue in the USA. Evidence that community level structures may impact on under-age drinking has led to a proliferation of efforts to change the environment surrounding the use of alcohol. Although the focus of these efforts is to reduce drinking by individual youths, environmental interventions are typically implemented at the community level with entire communities randomized to the same intervention condition. A distinct feature of these trials is the tendency of the behaviours of individuals residing in the same community to be more alike than that of others residing in different communities, which is herein called ‘clustering’. Statistical analyses and sample size calculations must account for this clustering to avoid type I errors and to ensure an appropriately powered trial. Clustering itself may also be of scientific interest. We consider the alternating logistic regressions procedure within the population-averaged modelling framework to estimate the effect of a law enforcement intervention on the prevalence of under-age drinking behaviours while modelling the clustering at multiple levels, e.g. within communities and within neighbourhoods nested within communities, by using pairwise odds ratios. We then derive sample size formulae for estimating intervention effects when planning a post-test-only or repeated cross-sectional community-randomized trial using the alternating logistic regressions procedure

The Importance and Role of Intracluster Correlations in Planning Cluster Trials

There is increasing recognition of the critical role of intracluster correlations of health behavior outcomes in cluster intervention trials. This study examines the estimation, reporting, and use of intracluster correlations in planning cluster trials. We use an estimating equations approach to estimate the intracluster correlations corresponding to the multiple-time-point nested cross-sectional design. Sample size formulae incorporating 2 types of intracluster correlations are examined for the purpose of planning future trials. The traditional intracluster correlation is the correlation among individuals within the same community at a specific time point. A second type is the correlation among individuals within the same community at different time points. For a “time × condition” analysis of a pretest–posttest nested cross-sectional trial design, we show that statistical power considerations based upon a posttest-only design generally are not an adequate substitute for sample size calculations that incorporate both types of intracluster correlations. Estimation, reporting, and use of intracluster correlations are illustrated for several dichotomous measures related to underage drinking collected as part of a large nonrandomized trial to enforce underage drinking laws in the United States from 1998 to 2004