Tim C. Opler

The Debt-Equity Choice

When firms adjust their capital structures, they tend to move toward a target debt ratio that is consistent with theories based on tradeoffs between the costs and benefits of debt. In contrast to previous empirical work, out tests explicitly account for the fact that firms may face impediments to movements toward their target ratio, and that the target ratio may change over time as the firms profitability and stock price change. A separate analysis of the size of the issue and repurchase transactions suggests that the deviation between the actual and the target ratios plays a more important role in the repurchase decision than in the issuance decision.

Corporate diversification and innovative efficiency an empirical study

Large diversified corporations have been widely criticized as being inefficient innovators with an orientation to maximizing short-term profits. This study investigates this criticism by testing whether the number of new products introduced per R&D dollar is lower among more diversified firms. We find no statistically discernible effect of diversification on innovative efficiency in a sample of 706 research-intensive firms in the 1981-1988 period. This is consistent with the argument that diversified organizations are rationally designed to minimize incentive and communication problems which may hinder their innovative efforts. In support of this argument, we find that diversified firms are more likely to have separate research and development centers which can be administered by managers whose compensation is tailored to maximize innovation.

Corporate Restructuring and the Consolidation of US Industry

This study examines the impact of corporate restructuring measured at the industry level on industry concentration in 695 four-digit U.S. industries in the basic, manufacturing, and services sectors between 1981 and 1989. The results show a modest increase in median industrial concentration in sample industries between 1981 and 1989. The authors find no evidence that selloffs of assets at the industry level through horizontal mergers, acquisitions, and interfirm asset sales increased U.S. industrial concentration during the 1980s. Copyright 1996 by Blackwell Publishing Ltd.

Testing Whether Predatory Commitments Are Credible

Many recent game-theoretic models suggest that, with asymmetric information, it can be profitable for firms to acquire a reputation for toughness to discourage later entry. The authors identify institutional arrangements that firms must undertake if predatory commitments are to be credible. For example, simply hiring managers who value market share or output maximization is insufficient if managers can be removed when it actually becomes necessary to engage in predation. Firms must also make removing the manager more difficult. The authors find no evidence that allegedly predatory firms are organized as these game-theoretic models imply. If anything, the reverse seems to be frequently true. Copyright 1996 by University of Chicago Press.