We present large sample evidence on the performance ofdomestic and U.S. (foreign) bidder firms acquiringCanadian targets. Domestic bidders earnsignificantly positive average announcement periodabnormal returns, while U.S. bidder returns areindistinguishable from zero. Measures of pre- andpost-acquisition abnormal accounting performance arealso consistent with a superior domestic bidderperformance. Domestic bidder announcement returnsare, on average, greatest for offers involving stockpayment and for the bidders with the smallest equitysize relative to the target. Neither direct foreigninvestment controls, horizontal product marketrelationships, nor acquisition propensities explainwhy domestic bidders outperform their U.S.competitors.

The popular finance literature describes the assetallocation decision as one of the most importantfactors in determining investment performance. Thisarticle reviews the implications of modern portfoliotheory for the asset allocation decision and thenexaminesthe recommendations of some leadingfinancial experts to see if they are consistent withtheory.

This paper proposes a two-factor hazard rate model, inclosd form, to price risky debt. The likelihood ofdefault is captured by the firm's non-interestsensitive assets and default-free interest rates.The distinguishing features of the model arethreefold. First, the impact of capital structurechanges on credit spreads can be analyzed. Second,the model allows stochastic interest rates to impactcurrent asset values as well as their evolution.Finally, the proposed model is in closed fom,enabling us to undertake comparative staticsanalysis, compute parameter deltas of the model,calibrate empirical credit spreads, and determinehedge positions. Credit spreads generated by ourmodel are consistent with empiricalobservations.

We distinguish between horizontal and vertical jointventures, and find correspondingly differentvaluation effects. Horizontal joint ventures createsynergistic gains that are shared by the partners.In contrast, vertical joint ventures generate gainsonly for suppliers. This is similar to the patter wefind for simple contracts, which suggests economicsimiliarities between vertical joint ventures andcontracts. Analysing firms' choices between thesecontracting options, we find that firms choosevertical joint ventures over simple contracts whenpotential hold-up problems are severe and whensuppliers face finance constraints. The results dnot support a risk-sharing motive for jointventures.

The paper examines the determinats of contract terms onbank revolving credit agreements (revolvers) ofmedium/large publicly traded companies. We model theduration (maturity), secured status, and pricingdecisions within a simultaneous decision framework,thereby overcoming the biased and inconsistentestimates in prior single equations studies of debtcontract terms. We find strong interrelationashipsbetween contract terms with significantbi-directorinal relationships between duration andsecure status and between the all-in-spread andcommitment fees and aunidirectional relationshipfrom both duration and secured status toall-in-spread. We also illustrate how several singleequation studies of contract terms draw incorrectconclusions because of their (inappropriate)assumption that other contract therms and leveragewere exogenous. Finally, our results support thehypothesis that the setting of contract terms playsand important role in alleviating contractingproblems.

This paper assesses the importance of the role ofprices as aggregators of private information in theS&P 500 future market. We estimate primitiveparameters of the Hellwig (1980) noisy rationalexpectations model, when both prices and terminalvalues are observable. The variance-covarianceparameters governing futuers prices and terminalvalues can be inverted to obtain estimate of theprimitive parmeters, including the precision ofprivate infromation and the variance ofliquidity-motivated trades. We also estimatecoefficients in the linear price conjecture, weightsthat agents place on different sources ofinformation, and the informativeness of prices. Wefind that the variance of the error term in agents'private signals is several orders of magnitudelarger than the variance of liquidity-motivatedtrades. But, in a large market, prices are still soinformative that the market as a whole appears toweight them more than prior beliefs.