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Abstract:
Using data from 20 countries that have suffered a currency crisis, this paper studies firm-level leverage and performance before and after a crisis has occurred. First we provide some evidence of increasing leverage both before and after a crisis. We show that, in the years preceding a currency crisis, companies that benefit from currency depreciations increase their leverage more than companies that are harmed by currency depreciations. These findings do not hold for countries with either floating exchange rates or currency boards. We argue that increasing leverage is a sign that some firms behave strategically towards governments that lack commintment mechanisms not to devalue their currencies. We also provide evidence that the Asian crisis is different from the previous European and Latin American ones: in Asia firms become more fragile after the crisis and their profitability declines further, whereas in Europe and Latin America there are clear signs of recovery after a crisis has occurred.

Currency Crises, Corporate Leverage, Capital Structure, Profitability, Exchange Rates

Abstract:
This paper demonstrates that preferred stock may arise as an optimal security in a tax-induced equilibrium. This result is driven by graduated tax schedules and by uncertainty. In a more general sense, our results can be interpreted as a template for including any security with a different tax treatment in a firm's capital structure. The first part of the paper demonstrates that the Miller (1977) equilibrium framework can accommodate more than two securities if different investor classes are taxed differently on each security and the tax schedule for each investor group is upward sloping. We then simplify the tax schedule, but introduce uncertainty, which implies the possibility of bankruptcy and the possible loss of tax shelters. The interaction of tax rates and seniority now affects the contribution of each security to after-tax firm value, as in some states the firm may not be able to pay either interest (or dividends) or even principal to its various claimholders. It is shown why and how these features, i.e. the various tax rates and seniority, determine the financing equilibrium, which is obtained by equating the expected marginal tax benefit of all securities. We demonstrate that non-profitable firms will tend to issue preferred shares whereas profitable firms will not find preferred stock advantageous in our framework. Comparative statics with respect to various tax rates are derived as well. These predictions are tested using a large sample of firms for the last twenty-five years. The empirical testing broadly confirms the theoretical predictions.

Abstract:
There is a growing literature on the differential impact of "soft" vs. "hard" information on organizational structure and behavior. This study is an attempt to empirically quantify the value of soft information, using a data-base on the market for screenplays. Script quality is difficult to estimate without subjective evaluation. Therefore soft information should be an integral part of the pricing of these intellectual assets. In our empirical analysis, we find that "hard information" (reputation) variables as well as "soft information" proxies are priced. Screenplays with high soft information content are priced significantly lower than "high concept" "harder information" - type scripts. We also follow the screenplays to production, and find that buyers seem to be able to forecast the success of a script, paying more for screenplays resulting in more successful films. In other words, "high concept" (harder information) screenplays sell for more and result in more successful movies.

Abstract:
This paper uses a unique sample of 175 Spanish equity offerings from 1985 to 2002 to test who benefits from IPO underpricing and why. Institutions receive nearly 75% of the profits in underpriced issues, while they have to bear only 56% of the losses in overpriced offerings. Superior information regarding first day underpricing cannot completely explain the institutional abnormal profits. Underwriters are better informed about the companies they take public, and use that information to favor their long term clients. The preferential treatment of institutional investors, however, does not come at the expense of retail investors. Retail investors earn positive profits from participating in the new issues market. The driving factor behind the relative retail large allocation in overpriced issues when compared to underpriced offerings is not the underwriter allocation bias in favor of institutional investors. Retail investors subscribe more heavily to underpriced issues, consistent with individuals being partially informed.

Initial Public Offerings, Allocations, Retail Investors, Winner's Curse

Abstract:
There is a growing literature on the differential impact of soft vs. hard information on organizational structure and behavior. Most empirical papers on soft information study the financial intermediation industry. This is one of the few papers that measure the impact of soft information in a different industry, namely, on sales of spec (unsolicited) screenplays.

In our empirical analysis, we find that hard information (measurable experience) variables as well as soft information proxies, such as descriptive complexity, are priced. Screenplays with high soft information content are priced lower than harder information-type scripts. This is especially true for less experienced writers. We also find that large studios shun soft information, as predicted by most theories. This paper is also one of the few studies that analyze empirical contract design. We show that soft information and screenwriter reputation will affect the type of contracts offered, suggesting that contingent contracts may work when uncertainty and asymmetric information interact. We also find that large firms tend to offer more contingent contracts and pay a premium for hard information, similar to the findings in the banking literature. In the last part of the paper we follow some of the screenplays to production, and find that buyers seem to be able to forecast the success of a script, paying more for screenplays resulting in more successful films. In other words, harder information screenplays sell for more and result in more successful movies.

Soft information, Screenplay Sales, Contract Design, Efficient Markets

Abstract:
There is a growing literature on the differential impact of 'soft' vs. 'hard' information on organizational structure and behavior. This study is an attempt to empirically quantify the value of soft information, using a data-base on the market for screenplays. Script quality is difficult to estimate without subjective evaluation. Therefore soft information should be an integral part of the pricing of these intellectual assets. In our empirical analysis, we find that 'hard information' (reputation) variables as well as 'soft information' proxies are priced. Screenplays with high soft information content are priced significantly lower than 'high concept' 'harder information' - type scripts. We also follow the screenplays to production, and find that buyers seem to be able to forecast the success of a script, paying more for screenplays resulting in more successful films. In other words, 'high concept' (harder information) screenplays sell for more and result in more successful movies.

Abstract:
This paper studies firm-level leverage and performance measures before and after a currency crisis has occurred using data from 17 countries. We show that prior to a crisis, companies that are expected to benefit from currency depreciations increase their leverage more than other companies. Profitability and financial fragility ratios display similar patterns. We provide evidence that the Asian crisis is different from the previous European and Latin American ones: in Asia all firms become more fragile after the crisis and their profitability declines and leverage increases further, whereas elsewhere there are clear signs of recovery after a crisis has occurred.

Currency crises, corporate leverage, capital structure, profitability, exchange rates