One Share/One Vote and the Market for Corporate Control

A corporation's securities provide the holder with particular claims on the firm's income stream and particular voting rights. These securities can be designed in various ways: one share of a particular class may have a claim to votes which is disproportionately larger or smaller than its claim to income. In this paper we analyze some of the forces which make it desirable to set up the corporation so that all securities have the same proportion of votes as their claim to income ("one share/one vote"). We show that security structure influences both the conditions under which a control change takes place and the terms on which it occurs. First, the allocation of voting rights to securities determines which securities a party must acquire in order to win control. Secondly, the assignment of income claims to the same securities determines the cost of acquiring these voting rights. We will show that it is in shareholders' interest to set the cost of acquiring control to be as large as possible, consistent with a control change occurring whenever this increases shareholder wealth. Under certain assumptions, one share/one vote best achieves this goal. We distinguish between two classes of benefits from control: private benefits and security benefits. The private benefits of control refer to benefits the current management or the acquirer obtain for themselves, but which the target security holders do not obtain. The security benefits refer to the total market value of the corporation's securities. The assignment of income claims to voting rights determines the extent 'to which an acquirer must face competition from parties who value the firm for its security benefits rather than its private benefits.

Unemployment with Observable Aggregate Shocks

Consider an economy subject to two kinds of shocks: (a) an observable shock to the relative demand for final goods which causes dispersion in relative prices, and (b) shocks, unobservable by workers, to the technology for transforming intermediate goods into final goods. A worker in a particular intermediate goods industry knows that the unobserved price of his output is determined by (1) the technological shock that determines which final goods industry uses his output intensively and (2) the price of the final good that uses his output intensively. When there is very little relative price dispersion among final goods, then it doesn't matter which final goods industry uses the worker's output. Thus the technological shock is of very little importance in creating uncertainty about the worker's marginal product when there is little dispersion of relative prices. Hence an increase in the dispersion of relative prices amplifies the effect of technological uncertainty on a worker's marginal value product. We consider a model of optimal labor contracts in a situation where the workers have less information than the firm about their marginal value product. A relative price shock of the type described above increases the uncertainty which workers have about their marginal value product. We show that with an optimal asymmetric information employment contract the industries which are adversely affected by the relative price shock will contract more than they would under complete information (i.e., where workers could observe their marginal value product). On the other hand the industry which is favorably affected by the relative price shock will - not expand by more than would be the case under complete information. Hence an observed relative demand shock, which would leave aggregate employment unchanged under complete information, will cause aggregate employment to fall under asymmetric information about the technological shock.

The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration

Our theory of costly contracts emphasizes that contractual rights can be of two types: specific rights and residual rights. When it is costly to list all specific rights over assets in the contract, it may be optimal to let one party purchase all residual rights. Ownership is the purchase of these residual rights. When residual rights are purchased by one party, they are lost by a second party, and this inevitably creates distortions. Firm 1 purchases firm 2 when firm 1's control increases the productivity of its management more than the loss of control decreases the productivity of firm 2's management.Economic

Unemployment with Observable Aggregate Shocks

A general equilibrium model of' optimal employment contracts is developed where firms have better information about labor's marginal product than workers. It is optimal for the wage to be tied to the level of employment, to prevent the firm from falsely stating that the marginal product is low and cutting the wage. It is shown that an observed aggregate shock that leads to an interindustry shift in labor demand and that would have no effect on total employment under symmetric information leads to a reduction in employment when firms and workers have asymmetric information.Economic

Balloon dilation of mitral stenosis in adult patients: Postmortem and percutaneous mitral valvuloplasty studies

Preliminary reports have documented the utility of percutaneous balloon valvuloplasty of the mitral valve in adult patients with mitral stenosis, but the mechanism of successful valve dilation and the effect of mitral valvuloplasty on cardiac performance have not been studied in detail. Accordingly, mitral valvuloplasty was performed in five postmortem specimens and in 18 adult patients with rheumatic mitral stenosis, using either one (25 mm) or two (18 and 20 mm) dilation balloons. Postmortem balloon dilation resulted in increased valve orifice area in all five postmortem specimens, secondary to separation of fused commissures and fracture of nodular calcium within the mitral leaflets. In no case did balloon dilation result in tearing of valve leaflets, disruption of the mitral ring or liberation of potentially embolic debris.Percutaneous mitral valvuloplasty in 18 patients with severe mitral stenosis (including 9 with a heavily calcified valve) resulted in an increase in cardiac output (4.3 ± 1.1 to 5.1 ± 1.5 liters/min, p < 0.01) and mitral valve area (0.9 ± 0.2 to 1.6 ± 0.4 cm2, p < 0.0001), and a decrease in mean mitral pressure gradient (15 ± 5 to 9 ± 4 mm Hg, p < 0.0001), pulmonary capillary wedge pressure (23 ± 7 to 18 ± 7 mm Hg, p < 0.0001) and mean pulmonary artery pressure (36 ± 12 to 33 ± 12 mm Hg, p < 0.01). Left ventriculography before and after valvuloplasty in 14 of the 18 patients showed a mild (≤1 +) increase in mitral regurgitation in five patients and no change in the remainder. Embolic phenomena were not observed in any patient.Serial radionuclide ventriculography showed an increase in left ventricular peak filling rate (2.20 ± 1.20 to 2.50 ± 1.20 end-diastolic volumes per second [EDV/s], p < 0.05). Serial echocardiography/phonocardiography showed improvement in mitral valve excursion (11 ± 6 to 14 ± 6 mm, p < 0.001), mitral EF slope (7 ± 4 to 13 ± 5, p < 0.001), left atrial diameter (5.7 ± 0.9 to 5.3 ± 0.8 cm, p < 0.001), S2-opening snap interval (0.07 ± 0.03 to 0.08 ± 0.02 second, p < 0.02) and mitral valve area (0.9 ± 0.2 to 1.5 ± 0.4 cm2, p < 0.0001). All patients were discharged from the hospital with de- creased symptoms after valvuloplasty.It is concluded that percutaneous mitral valvuloplasty can be performed in adult patients with mitral stenosis, including patients with calcific disease, and can result in significant improvement in valvular function. The mechanisms of successful dilation include commissural separation and fracture of nodular calcium