Robert E. McCormick

Managerial Decision Making and Capital Structure

This article investigates leverage influence on project selection. First, the authors examine 428 mergers (1962-82) and then 389 acquisitions of all types (1982-86). Announcement-period acquirer returns are greater the higher the leverage of the acquirer. A third data set contains 173 acquisitions undertaken during 1978-90 for firms that underwent major increases in leverage, often forced by hostile takeover. Acquisition performance increases after restructuring. The evidence is invariant with respect to methodology--beta-adjusted abnormal returns, numeraire portfolio approach, and three-factor regression model residuals produce identical results. Overall, the data support the hypothesis that debt improves managerial decision-making. Copyright 1993 by University of Chicago Press.

A Positive Theory of Environmental Quality Regulation

This paper demonstrates that environmental-quality regulation may enhance producer wealth while simultaneously reducing an externality problem by restricting access to common property. Regulation not only corrects a resource misallocation, but it creates a scarcity rent as well. In the recent history of environmental quality, the common-access problem has been addressed by federal and state agencies through a standards-based approach, rather than through the enforcement of tradable property rights. As a consequence, rents from the right to use these assets have accrued to producers. The data are convincing that there is a strong interplay between producers, consumers, and the victims of pollution. Each party has some influence on the outcome, and one-sided analysis neglects many important aspects of regulation. Environmental-quality regulation is complicated, but many of the observed perplexities are consistent with a rent-seeking, self-interest theory of government. 46 references, 1 figure, 7 tables.

POLITICIANS, LEGISLATION, AND THE ECONOMY

For several decades, the government sector has been viewed as a productive entity that behaves in an all-knowing, benevolent manner to promote the general welfare by correcting market failures. Recently, several economists have challenged this view, arguing that the behavior of politicians, like that of other individuals, is motivated by self-interest In this book, the interestgroup theory of government is used as the basis for an analysis of the behavior of politicians in supplying legislation and the manner in which they are paid for this activity.

Sealed Bids, Sunk Costs, and the Process of Competition

How do firms recover precontract costs? For example, suppose 10 firms compete in a sealed-bid auction for the right to explore and develop an offshore oil field. Each spends

Crime on the Court

500,000 to estimate the value of the field and to prepare its bid. Suppose this investigation reveals that the tract is worth approximately

An Examination of the Role That Intercollegiate Athletic Participation Plays in Academic Achievement: Athletes' Feats in the Classroom

20 million. If sunk costs do not matter, competition dictates that the winner must bid

The Response of Workers to Wages in Tournaments Evidence From Foot Races

20 million, but if the winner is to recover its prebid costs the maximum offer can be only

Racial Integration as an Innovation: Empirical Evidence from Sports Leagues

19.5 million. Furthermore, long-run industry equilibrium considerations suggest that the highest bid will be only

Legislatures as Unions

15 million (

Why do black basketball players work more for less money

20 million minus the total bid preparation costs of