Duration Analysis of CEO Turnovers Using Proportional Hazard Model

To analyze CEO turnovers in large U.S. corporations over the period 1981 to 1990, this paper adopts a minimum chi-square estimation of proportional hazard model. A simple specification test of the proportional hazard assumption is also used. Empirical results indicate that elderly CEOs are more likely to be turned over (retirement effect) and worse-than-average CEOs face a lot higher turnover risk (disciplinary effect). Interestingly, performance is found to have non-proportional effects on CEO turnovers across tenure periods. At an earlier tenure as CEO, only good performance matters, increasing the chance of survival. On the other hand. at a later tenure. only bad performance makes a difference, enhancing the possibility of turnovers

Trade Credit and the Effect of Macro-Financial Shocks

Many studies examine why firms are financed by their suppliers, but few empirical studies look at the macroeconomic implications of such financial arrangements. Using disaggregated panel data, we examine how firms extend and use trade credit. We find that, controlling for the transactions or asset management motive, both accounts payable and receivable increase with tighter policy, implying that trade credit helps firms absorb the effect of a credit contraction. A comparison of S&P 500 firms with smaller firms, however, provides no evidence that when policy is tightened, large firms play the role of credit suppliers more actively than small firms.Economic models;trade credit, accounts payable, retained earnings, external financing, trade creditors, information asymmetry

Has Inventory Investment Been Liquidity-Constrained? Evidence From U.S. Panel Data

Based on an analysis of high-frequency panel data for U.S. firms, this paper finds that inventory investment has been liquidity-constrained in most periods during 1975-97, but less so, or not at all, during recessions. This result can be justified on the grounds that inventory fluctuations are largely attributable to unexpected sales shocks, and that firms increase liquid assets before recessions. Moreover, this results holds irrespective of whether the firm has a bond rating, contrary to the finding of Kashyap, Lamont, and Stein (1994) that inventory investment is liquidity-constrained during recessions only for firms without bond ratings.Monetary policy;inventories, inventory, bond, cash flow, bond ratings, liquid asset, financial markets, cash flows, bond market access, bond market, bond rating, hedge, inventory management, aggregate inventories, stock exchanges, bonds, stock-flow identities, stock exchange, financial safety net, financial assets

Monetary Policy and Corporate Liquid Asset Demand

In contrast to conventional money demand literature, this paper proposes that monetary policy affects corporate liquidity demand directly through a separate channel-what we call "the loan commitment channel." Upon persistent monetary policy shocks, firms make substitutions between sources of funds for intertemporal liquidity management, taking advantage of loan commitments and sluggish movements in loan rates. To test this proposition, we estimate corporate liquidity demand, controlling for firm characteristics, using U.S. quarterly panel data. The results indicate that when monetary policy is tightened, S&P 500 firms initially increase their liquid assets before reducing them, whereas non-S&P firms reduce them more quickly.