List of Contributors and Indexes

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This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research

Volume Title: Corporate Capital Structures in the United States

Volume Author/Editor: Benjamin M. Friedman, ed.

Volume Publisher: University of Chicago Press

Volume ISBN: 0-226-26411-4

Volume URL: http://www.nber.org/books/frie85-1

Publication Date: 1985

Chapter Title: List of Contributors and Indexes

Chapter Author: Benjamin M. Friedman

Chapter URL: http://www.nber.org/chapters/c11427

Chapter pages in book: (p. 383 - 392) List of Contributors

Alan J. Auerbach Roger H. Gordon Department of Economics Department of Economics University of Pennsylvania University of Michigan 160 McNeil Building/CR Ann Arbor, MI 48109 Philadelphia, PA 19104 Martin J. Gruber Christopher F. Baum Graduate School of Business Department of Economics New York University Boston College New York, NY 10003 Chestnut Hill, MA 02167 Patric H. Hendershott Fischer Black Hagerty Hall Goldman, Sachs and Co. 1775 College Road 85 Broad Street Ohio State University New York, NY 10004 Columbus, OH 43210 Roger D. Huang Zvi Bodie Faculty of Finance School of Management University of Florida Boston University Gainesville, FL 32611 Boston, MA 02215 Michael C. Jensen John H. Ciccolo, Jr. Graduate School Citibank, NA of Management 55 Water Street University of Rochester New York, NY 10041 Rochester, NY 14627

Benjamin M. Friedman E. Philip Jones Harvard University Graduate School of Business Department of Economics Harvard University Littauer Center 127 Soldiers Field Road Cambridge, MA 02138 Boston, MA 02163

383 384 List of Contributors

Alex Kane Stewart C. Myers School of Management Sloan School of Management Boston University Massachusetts Institute 704 Commonwealth Avenue of Technology Boston, MA 02215 Cambridge, MA 02139

Michael S. Long Eric Rosenfeld Department of Finance Graduate School of Business University of Illinois Harvard University Chicago, IL 60680 Soldiers Field Road Boston, MA 02163 Robert McDonald School of Management John T. Scott Boston University Department of Economics 704 Commonwealth Avenue Dartmouth College Boston, MA 02215 Hanover, NH 03755

Ileen B. Malitz Gary Smith Department of Finance Department of Economics University of Illinois Pomona College Chicago, IL 60680 Claremont, CA 91711

Scott P. Mason A. Michael Spence Graduate School of Business Faculty of Arts and Sciences Harvard University University Hall Soldiers Field Road Harvard University Boston, MA 02163 Cambridge, MA 02138

Wayne H. Mikkelson Robert A. Taggart, Jr. College of Business School of Management Administration Boston University University of Oregon 704 Commonwealth Avenue Eugene, OR 97403 Boston, MA 02215

Franco Modigliani Jess Barry Yawitz Sloan School of Management School of Business Massachusetts Institute Washington University of Technology St. Louis, MO 63130 Cambridge, MA 02139 Author Index

Auerbach, Alan J., 306, 310, 311 Gibbons, Michael R., 137, 140 Goldsmith, Raymond W., 23 Baxter, N., 325 Gordon, Roger H., 19, 55 Black, F., 239, 241, 304, 326 Grossman, S., 181 Blanchard, Olivier J., 201 Blinder, Alan S., 119, 136 Hamada, Robert R., 335 Blume, M., 181 Hasbrouck, J., 181 Bradley, Michael, 298 Hendershott, Patric H., 128,139,140,145, Brainard, William C, 83, 92, 200, 201 152 Brennan, M., 253 Holland, Daniel M., 18, 19 Hu, Sheng Cheng, 140 Carlson, John A., 140, 156 Hulten, Charles R., 302 Ciccolo, John C, Jr., 19 Cohn, Richard A., Ill, 126 Ibbotson, Roger G., 164, 175, 183 Cook, Timothy Q., 136, 152 Ingersoll, J., 239, 240, 256 Cox, J., 253 Jensen, Michael C, 30, 58, 298, 304, 325 Dann, Larry Y., 265, 297, 298 Day, N. E., 94 Kiefer, Nicholas M., 95 DeAngelo, Harry, 269, 298, 305, 338, 351 King, Mervyn A., 306 Dodd, Peter, 298 Korwar, A. N., 265, 297 Donaldson, G., 342 Kuznets, Simon, 27 Dougherty, Ann, 119, 136 Leftwich, Richard, 298 Estrella, Arturo, 203 Lindenberg, Eric B., 83 Linn, Scott C, 298 Fama, Eugene F., 136, 137, 140 Lintner, John V., 207, 220 Feldstein, Martin, 83, 203 Friedman, Benjamin M., 1, 27, 52, 83, 110 McConnell, John J., 298 Friend, I., 181 McCulloch, J. Huston, 125, 151, 152 Fuhrer, Jeffrey, 203 Majluf, N. F., 349 Malkiel, Burtin G., 19, 55 Garbade, Kenneth, 136 Markowitz, H., 169

385 386 Author Index

Marsh, P., 271 Samatz, Arnold W., 27 Mason, S., 253 Scholes, M., 239, 241, 271, 304, 326 Masulis, Ronald W., 265, 269, 292, 297, Schwartz, E., 253 305,338,351 Scott, James H., 303 Meckling, William H., 30, 58, 298, 304, 325 Sharpe, William F., 220 Merton, Robert C., 169,174,176,183,187, Shiller, Robert J., 181 239, 241, 244, 304 Shilling, James D., 145 Mikkelson, Wayne H., 265, 297 Sinquefield, R. A., 164, 175, 183 Miller, Merton H., 15, 17, 29, 30, 32, 197, Smith, C, 326 265,268,272,303,304,325,338,342,350 Mishkin, Frederic S., 124, 136 Taggart, Robert A., Jr., 307 Modigliani, Franco, 29, 30, 111, 126, 197, Tobin, J., 197, 200, 201, 206 272, 303, 325 Myers, Stewart C, 18,19, 42, 53, 304, 325, Van Home, James C, 128 326, 334, 349 Van Order, Robert, 119, 136 von Furstenberg, George M., 19, 143, 157 Parkinson, M., 253 Plantes, Mary Kay, 201 Wachtel, Paul, 136 Wakeman, L. Macdonald, 298 Rice, Edward M., 298 Warner, J., 326 Robertson, James W., 302 Rosenfeld, Ahron, 297 Ross, Stephen A., 32, 83, 304 Rubenstein, M., 335 Subject Index

Accelerated Cost Recovery System, 301 Business cycles. See Cycles Advertising investments, 334-35; and cash Business failures, 55 flow, 338 Business risks, 55 Agency cost model, 37, 39 Agency costs, 52-53; and corporate invest- Call announcements, 267-68, 270; anticipa- ment, 42-43 tion of, 290; relative price change at, 273; Agency theory, 30-31 unanticipated, 267, 292n.2 Asset aggregation systems, 214-18 Capital, long-term, ratio to long-term debt, Asset demands: linearity of, 207; pro- 15, 17 portional to investors' wealth, 200 Capital structure, 2; and abundance of Asset returns, 199-206, 234-35; after tax, financial resources, 371; asset risk effects, 218-19; changes over time, 218-22; sta- 335; changes in, 2; and common stock bility of, 219 prices, 265; debt, increasing importance Assets, replacement value of, 23 of, 84, 88; deviations of actual from Asset substitution, 331-34 optimal, 355-58, 361-67; and financial condition, 376-77; internally generated Balance sheet data, 69n.8; as guide to funds, 342, 348; noneconomic factors in, corporate financing patterns, 15-17 378; nonfinancial, 83; overall source of, 2; Bankruptcy, possibility of, 30 tax rates as determinants of change, 34- Bankruptcy/agency cost models, 303-4 37; theories of, 29-34; trade-off between Bankruptcy costs, 34, 42, 52-53, 55, 58, bankruptcy costs and tax savings, 30; 303-4; and capital structure, 30 trends, measurement of, 15-28 Bonds: callable coupon, 214-42, 247; Capital utilization, and Treasury bill rates, corporate, ex post monthly returns, 124- 142 28; debt issues, 247-51; index, nonexis- Cash flow: advertising correlation, 338; tence of in U.S. capital market, 190; in- deficit, 322; effect on financial leverage, formation content of past returns on, 148; 342-44, 351; research correlation, 338 long-term, as risky investment, 167; man- Common stock: price changes, and capital datory retirement of, 242; privately financing structure, 265; returns, and issued, trading in, 191; retirement of, 242 convertible securities, 266; returns, and Buildings: tax lifetime of, 302; tax rates on, tax shields, 266 302 Competitiveness, in market environment, Business, stability of, 55 358

387 388 Subject Index

Consumer Price Index: contamination by local government, 52; long-term, 27,202; Nixon price controls, 136; housing costs long-term, ratio to long-term capital, 15, in, 136; housing costs in, 136 17; long-term, riskiness of, 236; ratios, Conversion premium, 292n.3; estimates of, increase in, 13-23, 69nn.lO, 11; ratios, to 290; reduction in, 277; transfer of, 270 market value, 113; short-term, 202; state, Convertible securities: calls, and share price 52 effect, 267; and common stock returns, Debt equity, stability in, 13, 69n.3 266; cross-sectional analysis of, 281-91; Debt financing: increase in, 27; postwar determinants of changes in stockholders trends in, 83; relationship to equity wealth, 267-72 financing, 27 Corporate bonds. See Bonds Debt issues, multiple, 247-51 Corporate borrowing, economic model of, Debt securities, substitutabilUy of, 209, 307-9 222, 225-26 Corporate debt: costs, 42; demand for, 30, Debt-to-value ratios, 322 70n.l6; effect of tax rate increase on, 66; Deficits, and cash flow, 322 equity as substitute for, 60; government Deflation, 119 bonds as substitute for, 41; and govern- Delaware corporations, 298 ment debt, 52, 58; institutionalization of Depreciation, 301, 302; allowances, effect market, 65; inverse relationship to fed- on equity value, 17 eral debt, 58; mandatory retirement of Diversification, incomplete welfare loss bonds, 242; post-World War II, 49, 52; from, 173-75, 183-89, 191 ratios, increase in, 19, 23; substitutions Dividends, tax deductibility of, 37 for equity, 60; supply curve, 30, 62-63, 70n.l7; taxes, effect on, 66 Earnings dilution effect, 271-72 Corporate finance: academic studies of, Earnings variance, 323 68n.l; balance sheet data in study of, 15- Economic models: bankruptcy/agency, 17; and bankruptcy costs, 55; debt and 303-4; corporate borrowing, 307-9; equity claims distinction, 197; determi- corporate liability pricing, 241-42; debt nants of, 44; and inflation, 37-40; pat- and taxes, 32; equilibrium, 214, 220; lim- terns of, increase in debt financing, ited tax shield, 305-6; partial adjustment, 71n.33; patterns of, and inflation, 48; 214, 220; portfolio, 93-95; portfolio be- secular trends in, 34-44,77; tax factors in, havior, 199-206; portfolio selection, 169- 34-37 73; pricing, for bond returns, 164; sig- Corporate investment, and agency costs, naling, 32; tax clientele, 306; tax shield, 42-43 305-6 Corporate leverage. See Financial leverage Economic Recovery Tax Act of 1981, 301 Corporate liabilities. See Corporate debt Employer-sponsored tax-deferred savings Corporate securities: demand curves, 60- plans, 189 64; institutionalization of market, 65; in- Equilibrium model, 214, 220 vestors' valuation of, 66-68; supply Equipment maintenance, and potential curves, 60-64 underinvestment, 326 Corporate tax rates, 33, 34, 45-48; upward Equity: estimates of market value, 18; ex trend in, 71n.31 post monthly returns, 128-35; ex post Cycles, 147; and investment returns, 122-24 monthly returns, related to future economic activity, 147; and political cycle, Debt (see also Corporate debt): agency 133; stockholders, 91; substitutions for costs of, 326; change in, resulting from corporate debt, 60; and unanticipated in- change in expected inflation, 38-39; flation, 133, 161n.l8 effective maturity of, 241; elasticity of de- Equity securities, substitutability of, 209, mand, 30; estimates of market value, 18; 222, 225-26 federal, and corporate debt, 52, 58; Expensing, vs. depreciation, 302 household mortgages, 52, 71n.34; in labor-intensive firms, 375; lagged, 322: Federal debt, and corporate debt, 52, 58 389 Subject Index

Financial leverage, 341; and cash flow,342 - Investments, in long-term bonds, 167 44, 351; changes in, 40; and competitive Investment tax credits, 302; financiallever - environment, 346n.ll; and depreciation, age and, 338 338; effect of investment type on, 334; flow of funds data, 25-28, 69n.l2; impor- Labor-intensive firms, use of debt by, 375 tance of investment type, 345; in in- Leverage. See Financial leverage flationary period, 110-11, 114; and in- Local government debt, 52 vestment choice, 326-33; and investment tax credits, 338; and moral hazard prob- Market value: estimates of data, 18-22; lem, 344, 345; and personal tax rates, 36; ratio to debt, 113; and replacement value postwar rise in, 113; replacement cost of tangible assets, 87-88; and reproduc- data, 22-25; and tax code, 47; and tax tion cost, 112 credits, 338; tax shield availability, 338; Means-of-payment services, 202 theories of, 303-7; total risk effect on, Models. See Economic models 341-43 Moral hazard model, 338, 344, 345 Financial policy, variables in forecasting, Mortgages, household, 52, 7In.34 322 Financial system, corporate sector and, Noncorporate securities, supplies of, 48-49 60-61 Financing: use of internal and external Panel Data System, 103-7 funds, 85; trends, academic studies of, 14 Partial adjustment model, 214, 220 Fiscal surprise, 141^45 "Pecking order" theory, 348 Funds: internal, 85; short-term sources of, Personal tax rates, 33, 34, 36, 45-48 344 Policy surprise, 141-45 Politics, effect on equity returns, 133 Government, liabilities of, 49, 52, 58, Portfolio behavior, of household sector, 71n.34 206-14 Government, local, debt of, 52 Portfolio model, 93-95, 169-73, 199-206 Government bonds, as substitute for corpo- Portfolio selection, 214-18, 233-38; model, rate debt, 41 169-73 Preferred stock, 36, 37; relative value of, Household mortgage debt, 49, 52, 7In.34 19; secular decline, 17, 69n.7, 70n.23 Household portfolio behavior, 206-14 Price controls, effect on Consumer Price Housing costs, and Consumer Price Index, 136 Index,136 Pricing model, for bond returns, 164 Product market: environment, 358-61; and Inflation, 37-40, 48, 70n.27; and bond re- optimal capital structure, 366; pressures turns, 121; and equity returns, 121, of, 354 159nn.2, 3; premium, 168; and Treasury bill returns, 119-21, 135-41; unanticipated, 133, 156-57, 161n.l8; unantici- Rate of return, 90-93; determinants of, pated, defined, 147 367-71; "noise" in, 376 Information effect hypothesis, 267, 297 Ratios: debt, to market value, 113; debt, Interest expense: price effects relationship, upward shift of, 13-23, 69nn.lO, 11; 292; tax deductions, 268-69; tax deduc- financial, measurement of, 13; increase in tions, change in, 275-76; tax shields, and corporate debt, 19; long-term debt to announcement period of adjusted stock long-term capital, 15, 17 returns, 289; tax shields, and common Reproduction cost method of valuation, 112 stock returns, 266 Research and development investments, Interest rates, market determined, inflation 334-35 premium in, 168 Return, rates of, 90-93 Investment choices: and financial leverage, Risk, effect on financial leverage, 341-43 326-33; multitude of, 201 Risk aversion, 170 390 Subject Index

Risk premiums, and portfolio proportions, Tax credits, financial leverage and, 338 172, 181, 183 Tax deductions: dividends, 37; interest expense, 268-69, 275-76 Savings, individual, and transformation Taxes: and corporate financing decisions, activities, 61-62 44; differential, 256; effect on corporate Savings plans: employer-sponsored, wel- debt, 66 fare loss from investment restrictions, Tax factors, in corporate finance, 34-37 191; tax-deferred, 189 Tax lifetime of buildings, 302 Securities {see also Common stock; Con- Tax loss carry-forward, 322 vertible securities; Preferred stock; Tax rates: on buildings, 302; corporate, 34- Stock): noncorporate supplies of, 48-49; 36,45-48; marginal, on investments, 302; senior, change in value of, 269, 276 personal, 33,34,36,45-48; on structures, Signaling model, 32 302 Sinking funds, 242-47 Tax savings: bankruptcy costs 34, 58, State debt, 52 70n.20; and capital structure, 30 Stock: calls, and share price effect, 268-69; Tax shield models, 305-6 common, see Common stock; determi- Time and savings deposits, 202, 235 nants of changes in stockholders' wealth, Treasury bills: and inflation, 119-21, 135- 267-72; issues, decline in use of as financ- 41; as long-term investment, 167; rates, ing source, 27; negative price reactions, and capital utilization rates, 142; rates, 270-72; preferred, see Preferred stock; random walk behavior, 140; rates, rela- senior securities, 266-67 tionship to real economic activity, 140; Stockholders' equity, denned, 91 rates, unanticipated changes, 141-45; Stockholders' wealth: cross-sectional analy- rates, volatility of, 120; short-selling of, sis of, 281-91; determinants of changes in 185 conversion premium reduction, 277,279- Trends: in capital structure, 44-59; in 80; earnings per share, 280; interest ex- financing, 14 pense tax deductions, 275-76; relative price change at call announcement, 273- Underinvestments, 328-30, 341; bondhold- 75; senior securities value, 276-77; shares ers' anticipation of, 330 outstanding increase, 280 Stock issues, decline in use of as financing Valuation, reproduction cost model of, 112 source, 27 Value variance, 323 Structures, tax lifetime of, 302 Wealth redistribution, from common stock- Tax arbitrage, costs of, 61 holders to debtholders, 266 Tax clientele models, 306 World War II: effect on debt, 49, 52; post- Tax code, lack of incentive for corporate war rise in financial leverage, 113 leverage, 47 specifically related to actual or potential changes in corporate capital structures.The concluding papers examine directly the observed capital structures of US. corporations, emphasizing in particular the ques- tion of the relationship (if any) of capital structure decisions to corporations' real-sector behavior. Continuing the work begun in The Changing Roles of Debt and Equity in Financing U.S. Capital Forma- tion, this volume brings new, long-term empirical analysis to bear on vital questions of corporate finance and macroeconomic development. The result is an indispensable resource not only for academics interested in the financial structure of U.S. corporations and the relationship of corporate capital needs to those of government, but for the firms and individuals who make decisions on financing corporate investment.

BENJAMIN M. FRIKDMAN is professor of economics at Harvard University and program director for financial markets and monetary economics at the National Bureau of Economic Research. He is also the editor of The Changing Roles of Debt and Equity in Financing U.S. Capital Formation, published by the University of Chicago Press. An NBER Project Report

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