Corporate Inefficiency and the Risk of Takeover

The present study, using the Cox proportional hazard model, suggests a firm faces a significantly higher risk of takeover if its cost performance lags behind its industry benchmark. The effects of variables capturing cost inefficiency on the risk of takeover appear to be remarkably stable over the nearly two decades spanned by the sample, while the effect of the variables measuring the risk-size relationship indicate temporal changes. Once cost inefficiency is accounted for, the paper fails to find consistent evidence for the effects of other conventionally used performance measures, such as profitability and q, on the risk of takeover.

Learning from the Past: Trends in Executive Compensation over the Twentieth Century

In recent years, a large academic debate has tried to explain the rapid rise in CEO pay experienced over the past three decades. In this article, I review the main proposed theories, which span views of compensation as the result of a competitive labor market for executivesto theories based on excess of managerial power. Some of these hypotheses have foundsupport in cross-sectional evidence, but it has proven more difficult to determine which factors have caused the observed changes in pay over time. An alternative strategy is to evaluate the fit of plausible explanations out of sample by contrasting them with the evolution in executive pay and the market for managers during earlier time periods. A case study of General Electric suggests that evidence for earlier decades can speak to the recent trends and reveals the limitations of current explanations to address the long-run data.executive compensation, managerial incentives, corporate governance, market for managers

Imperfect Knowledge and Asset Price Dynamics: Modeling the Forecasting of Rational Agents, Dynamic Prospect Theory and Uncertainty Premia on Foreign Exchange.

Models using the Rational Expectations Hypothesis (REH) are widely recognized to be inconsistent with the observed behavior of premia in financial markets, as well as other features of asset price dynamics. Moreover, many reasons have been advanced as to why the REH cannot generally represent, even approximately, the expectations behavior of individually rational agents. In this paper, we develop a new model of the equilibrium premium in the foreign exchange market that replaces the REH with the Imperfect Knowledge Forecasting (IKF) framework. Because we maintain that agents must cope with imperfect knowledge and that they are not grossly irrational, our IKF approach imposes only qualitative conditions on the formation of individual forecasting models and their updating. We also develop a dynamic extension of the original formulation of Kahneman and Tversky's prospect theory. We find that under IKF and dynamic prospect theory, the equilibrium premium on foreign exchange is positively related to the gap between the aggregate forecast of the exchange rate and its historical benchmark level. We test this implication, using survey data on the German mark-U.S. dollar exchange rate, and find that the behavior of the ex ante premium on foreign exchange is consistent with our model of the premium.EXCHANGE RATES; RISK PREMIUM; IMPERFECT KNOWLEDGE; INDIVIDUAL Rationality; Expectations; Prospect Theory

Itinerant Ferromagnetism in the electronic localization limit

We present Hall effect, $R_{xy}(H)$, and magnetoresistance, $R_{xx}(H)$, measurements of ultrathin films of Ni, Co and Fe with thicknesses varying between 0.2-8 nm and resistances between 1 M$\Omega$ - 100 $\Omega.$ Both measurements show that films having resistance above a critical value, $R_{C}$, (thickness below a critical value, $d_{C}$) show no signs for ferromagnetism. Ferromagnetism appears only for films with $R<R_{C}$, where $R_{C}$ is material dependent. We raise the possibility that the reason for the absence of spontaneous magnetization is suppression of itinerant ferromagnetism by electronic disorder in the strong localization regime.Comment: 4 pages, 4 figure