Mark K. Pyles

Economic effect of a smoke-free law in a tobacco-growing community

Objective: To determine whether Lexington, Kentucky’s smoke-free law affected employment and business closures in restaurants and bars. On 27 April 2004, Lexington-Fayette County implemented a comprehensive ordinance prohibiting smoking in all public buildings, including bars and restaurants. Lexington is located in a major tobacco-growing state that has the highest smoking rate in the US and was the first Kentucky community to become smoke-free. Design: A fixed-effects time series design to estimate the effect of the smoke-free law on employment and ordinary least squares to estimate the effect on business openings and closings. Subjects and settings: All restaurants and bars in Lexington-Fayette County, Kentucky and the six contiguous counties. Main outcome measures: ES-202 employment data from the Kentucky Workforce Cabinet; Business opening/closings data from the Lexington-Fayette County Health Department, Environmental Division. Results: A positive and significant relationship was observed between the smoke-free legislation and restaurant employment, but no significant relationship was observed with bar employment. No relationship was observed between the law’s implementation and employment in contiguous counties nor between the smoke-free law and business openings or closures in alcohol-serving and or non-alcohol-serving businesses. Conclusions: No important economic harm stemmed from the smoke-free legislation over the period studied, despite the fact that Lexington is located in a tobacco-producing state with higher-than-average smoking rates.

Seasonal affective disorder and the pricing of IPOs

Purpose - It has been found that stock market returns vary seasonally with the amount of daylight, and they attribute this effect to seasonal affective disorder (SAD), which is a psychological condition that causes depression and heightened risk aversion during the fall and winter months. The goal of this study is to examine whether this effect also manifests itself in the pricing of initial public offerings (IPOs). Design/methodology/approach - The authors conduct an empirical analysis on IPO data collected over the period 1986-2000. Specifically, we examine potential pricing differences between IPO that go public during the fall and winter months, relative to other issues. The paper begins by exploring differences on a univariate basis (i.e. testing via Findings - The paper finds that IPOs experience higher levels of underpricing in both the fall and winter months and that offer price revisions are higher during the winter months. Both of these results are consistent with SAD influencing the IPO pricing process. Originality/value - The results suggest that behavioral issues (i.e. the emotions of buyers) may have as much of an effect on the pricing of IPOs as more traditional characteristics. Further, the results imply that firms with flexible issuance schedules should avoid going public during months affected by SAD, thereby potentially reducing the cost of issuance.

Venture capitalist quality and IPO certification

Abstract The opportunity cost of going public is directly related to the level of information asymmetry associated with the issuing firm. Independent third parties, such as underwriters and venture capitalists, are believed to mitigate this asymmetry through certification, thereby reducing this cost. Existing studies illustrate that higher quality underwriters provide increased certification value; however, current research is essentially mute with regard to the effect of venture capitalist quality. We fill this gap, finding that higher quality venture capitalists also provide incremental certification value relative to those of lower quality. Additionally, we suggest that the most appropriate measure of venture capitalist quality is a simple binary variable that captures prior experience as the lead of an IPO venture capital syndicate.

Economic Effects of Smoke-Free Laws on Rural and Urban Counties in Kentucky and Ohio

INTRODUCTION Numerous empirical studies have examined the influence of smoke-free legislation on economic activity, with most finding a null effect. The influence could possibly differ in rural areas relative to urban areas due to differing rates of smoking prevalence and access to prevention and treatment programs. Furthermore, the discussion of the effectiveness of smoke-free laws has been extended to consider local ordinances relative to statewide laws. This study examines these issues using 21 local laws in Kentucky and the Ohio statewide smoke-free law. METHODS The number of employees, total wages paid, and number of reporting establishments in all hospitality and accommodation services in Kentucky and Ohio counties were documented, beginning the first quarter 2001 and ending the last quarter of 2009. A generalized estimating equation time-series design is used to estimate the impact of local and state smoke-free laws in Kentucky and Ohio rural and urban counties. RESULTS There is no evidence that the economies in Kentucky counties were affected in any way from the implementation of local smoke-free laws. There was also no evidence that total employment or the number of establishments was influenced by the statewide law in Ohio, but wages increased following the implementation of the law. Furthermore, there is no evidence that either rural or urban counties experienced a loss of economic activity following smoke-free legislation. CONCLUSIONS The study finds no evidence that local or state smoke-free legislation negatively influences local economies in either rural or urban communities.

Economic effects of Ohio's smoke-free law on Kentucky and Ohio border counties.

Objective To determine if the Ohio statewide smoke-free law is associated with economic activity in Ohio or Kentucky counties that lie on the border between the two states. In November 2006, Ohio implemented a comprehensive statewide smoke-free law for all indoor workplaces. Design A feasible generalised least squares (FLGS) time series design to estimate the impact of the Ohio smoke-free law on Kentucky and Ohio border counties. Setting Six Kentucky and six Ohio counties that lie on the border between the two states. Subjects All reporting hospitality and accommodation establishments in all Kentucky and Ohio counties including but not limited to food and drinking establishments, hotels and casinos. Main outcome measures Total number of employees, total wages paid and number of reported establishments in all hospitality and accommodation services, 6 years before Ohios law and 1 year after. Results There is no evidence of a disproportionate change in economic activity in Ohio or Kentucky border counties relative to their non-border counterparts. There was no evidence of a relation between Ohios smoke-free law and economic activity in Kentucky border counties. The law generated a positive influence on wages and number of establishments in Ohio border counties. The null result cannot be explained by low test power, as minimum changes necessary in the dependent variables to detect a significant influence are very reasonable in size. Conclusions Our data add to the large body of evidence that smoke-free laws are neutral with respect to the hospitality business across jurisdictions with and without laws.

The Influence of a Credit Rating Change on Corporate Cash Holdings and Their Marginal Value

We examine the influence of credit rating changes on corporate excess cash holdings. We find that downgraded firms increase excess cash holdings by approximately 3% of total noncash assets, compared to a matched sample of firms without a rating change. We largely observe no significant cash policy change following upgrades. While our findings support existing studies on the value of precautionary cash hoarding in the face of increased financial constraint, we find hoarding is value-decreasing for shareholders. The marginal value of excess cash declines by at least 40% for downgraded firms and much more so when firms have histories of excess cash hoarding.

Bank marketing investments and bank performance

Purpose - The purpose of this paper is to examine empirically the effects of investments by US banks in advertising and promotion on their performance in the areas of profits and market share. Design/methodology/approach - The model presented in the paper is motivated by the theory of the profit function. We estimate a base model with a fixed-effects panel including an AR(1) disturbance over the period 2002-2006. To test for selection bias, we also estimate a Heckman model. Findings - It is found that bank profits and market share increase significantly with increased spending on advertising and promotion. Also, significant evidence is found of increasing returns to scale in this type of marketing expenditure. It is also found that increased expenditures on branching result in higher profits and increased market share, but without scale effects. The results are robust, the inclusion of variables is not suggested by profit function theory and corrected for prospective selection bias. Originality/value - The extant literature does not include research on the effectiveness of bank marketing from the viewpoint of its impact on profit performance. The findings should be of interest to academics in finance and marketing and to banking practitioners.

Smoke-free legislation and charitable gaming in Kentucky

Objective: To determine the effect of municipal smoke-free laws in Kentucky on gross and/or net revenues from charitable gaming activities. Between January 2000 and June 2007, 13 Kentucky communities implemented smoke-free legislation; only three specifically exempted charitable gaming facilities and compliance in several communities was not consistent. Kentucky is a tobacco-growing state that has the highest smoking rate in the United States. Design: A fixed-effects time series design to estimate the impact of municipal smoke-free laws on charitable gaming. Setting: 13 Kentucky counties that implemented smoke-free laws during the study period of January 2000 through June 2007. Subjects: All charitable gaming facilities in 13 counties in which a smoke-free ordinance was enacted during the study period. Main outcome measures: Gross and net revenues from charitable gaming activities in each county for each quarter of the study period, obtained from the Kentucky Department of Charitable Gaming. Results: When controlling for economic variables, county-specific effects and time trends using a robust statistical framework, there was no significant relation between smoke-free laws and charitable gaming revenues. Municipal smoke-free legislation had no effect on charitable gaming revenues. Conclusions: No significant harm to charitable gaming revenues was associated with the smoke-free legislation during the 7.5-year study period, despite the fact that Kentucky is a tobacco-producing state with higher-than-average smoking rates.

Internally versus Externally Advised Non-Brokerage Real Estate Firms

Although real estate investment trusts have been able to choose an internal advising structure since the passage of the Tax Reform Act of 1986, a significant number of real estate investment trusts (REITs) have opted to remain externally advised. Despite the higher management costs associated with retaining a third-party advisor, these REITs have done quite well, on average, over the intervening time period. This article examines the characteristics that lend themselves to third-party advising as an optimal management structure for REITs. It examines the decision from a perspective of profit maximization, seeking to identify significant relations between various REIT characteristics and third-party participation. Results indicate that only a REIT’s status as publicly traded and, correspondingly, the size of the firm, significantly influence the choice of internal versus external advising structure. In addition, after matching by firm type and size, the authors find that externally-advised firms experience higher returns on average assets and average equity. This finding contrasts with previous results using earlier time periods in which externally-advised REITs were shown to underperform their internally-advised counterparts.

Anti‐takeover techniques and corporate ownership structure

Purpose - The purpose of this paper is to analyze the role of large equity ownership by both institutions and outside block shareholders in monitoring the board of directors’ decision to initially adopt defense mechanisms and the subsequent capital market reaction to the adoption. Design/methodology/approach - This paper employs an empirical methodology that controls for selection bias. Multiple regressions were employed to assess the relationship among the variables. Findings - Stockholder wealth effects of poison pills are positively related to pressure-resistant institutions, which is consistent with effective monitoring. The wealth effects of poison pills, however, are negatively related to pressure-sensitive investors, consistent with passivity. No empirical relation was found between ownership structure and shareholder approved amendments such as classified boards and fair price amendments. Research limitations/implications - This study was conducted as a large sample analysis over an earlier time period that was more applicable for evaluating anti-takeover techniques. Practical implications - The results are consistent with pressure-resistant institutions actively monitoring to prevent unilaterally implemented defense mechanisms of all types, whereas pressure-sensitive institutions appear to more readily accept poison pills. Originality/value - These results suggest that failing to control for the type of outside investor may not clearly portray documented relations in other corporate governance studies.