Non-Standard Errors

In statistics, samples are drawn from a population in a data-generating process (DGP). Standard errors measure the uncertainty in estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence-generating process (EGP). We claim that EGP variation across researchers adds uncertainty: Non-standard errors (NSEs). We study NSEs by letting 164 teams test the same hypotheses on the same data. NSEs turn out to be sizable, but smaller for better reproducible or higher rated research. Adding peer-review stages reduces NSEs. We further find that this type of uncertainty is underestimated by participants

Non-standard errors

In statistics, samples are drawn from a population in a data-generating process (DGP). Standard errors measure the uncertainty in estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence generating process (EGP). We claim that EGP variation across researchers adds uncertainty: Non-standard errors (NSEs). We study NSEs by letting 164 teams test the same hypotheses on the same data. NSEs turn out to be sizable, but smaller for better reproducible or higher rated research. Adding peer-review stages reduces NSEs. We further find that this type of uncertainty is underestimated by participants

Optimal Revenue Sharing Contracts with Externalities and Dual Agency

A model of bilateral trade between an upstream supplier (landlord) and a downstream producer (retailer) is constructed, in which the upstream supplier confers long-term property usage rights to the downstream supplier in return for a base rental fee plus a percentage of verifiable sales production. Our model allows for the possibility that downstream sales production complements other activities of the upstream supplier to increase its total revenues. An optimal contract is designed that balances investment incentives of the downstream producer with initial investment and subsequent reinvestment incentives of the upstream supplier. A number of important stylized empirical facts associated with retail lease contracting are addressed with the model, including why: i) retail leases contain base rents and often (but not always) contain an overage rental feature, ii) stores that generate greater externalities pay lower base rents and have lower overage rent percentages than stores that generate fewer externalities, iii) the overage rent option is typically well out-of-the-money at contract execution, and iv) stand-alone retail operations often sign leases that contain an overage rental feature. Optimal Revenue Sharing Contracts with Externalities and Dual Agency I

Collateral and the limits of debt capacity: theory and evidence

This paper considers how collateral is used to finance a going concern, and demonstrates with theory and evidence that there are effective limits to debt capacity and the kinds of claims that are issued to deploy that debt capacity. The theory shows that firms with (unobservably) better quality collateral optimally pledge an unused portion of that collateral to finance new investment opportunities with unsecured debt, while firms endowed with lower quality collateral use project-specific secured debt. Better quality firms must also commit to maintaining an equity cushion to separate themselves from lesser quality firms, implying lower relative leverage and greater uncommitted cash flow from operations with which to meet debt service requirements. The fundamental empirical prediction derived from our model is that a firm’s financing choice, as it relates to asset quality, reveals information about firm value. To establish this link empirically, we rely on a natural experiment from the listed-property firm industry. Housing property-firms had access to Fannie Mae-Freddie Mac secured debt financing during the peak of the 1998 Russian crisis (but not other financing options), whereas Non-Housing firms were shut out of all financing channels. Empirical evidence indicates that, consistent with our theory, better quality Housing firms migrated from the unsecured debt market into the secured debt market during a time of high equity issuance costs, thus raising the average revealed asset quality of firms in the pool of secured debt issuers. We rely on a series of falsification tests to rule out alternative explanations for our empirical findings

Financing Choice and Liability Structure of Real Estate Investment Trusts

We conduct an analysis of public financial offerings of equity Real Estate Investment Trusts (REITs), with a focus on liability structure effects and whether or not firms target longer-run debt ratios. Our major findings are that (1) proceeds from equity offers are more likely to fund investment, whereas public debt offer proceeds are typically used to reconfigure the liability structure of the firm; (2) public debt issuers are often capital constrained and target total leverage ratios to retain an investment grade credit rating; and (3) the preoffer liability structure affects the issuance choice decision, in that firms with higher preoffer levels of secured (unsecured) debt tend to issue equity (public debt). Other notable findings are that the market for public REIT debt is integrated with the broader debt markets and that higher credit quality firms issue longer-maturing bonds. Copyright 2003 by the American Real Estate and Urban Economics Association