Working Papers
Mitchell A. Petersen
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1) Investment and Capital Constraints: Repatriations Under the American Jobs Creation Act
ABSTRACT:
The American Jobs Creation Act (AJCA)
significantly lowered the tax cost at which US firms could access their
unrepatriated foreign earnings. We use this temporary shock to the cost of
financing investment and its variation across firms, to examine the role of
financial constraints in the firm’s investment decisions. Controlling for the
ability to repatriate foreign earnings in a more tax efficient way under the
AJCA, we find that for a majority of firms there was little change in domestic
investment – the policy objective of the law. We do find, however, that for a
subset of firms which are financially constrained, that a majority of the
repatriated funds were invested in approved domestic investment. We find little
change in financial policy (e.g. leverage and equity payouts) once we control
for the ability to repatriate funds under the AJCA. These findings point out
the importance of understanding finance theory when designing optimally
targeted tax incentives.
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Full text of paper (Adobe Acrobat Format) |
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Last Revision: July, 2009 |
2) Information: Hard and Soft
ABSTRACT:
Information is an essential component of all financial markets and transactions. However information can arrive in multiple forms. In this paper, I begin to define what is meant by hard and soft information. Hard information is quantitative, easy to store and transmit in impersonal ways, and its content is independent of the collection process. Technology is changing the way we communicate and thus must fundamentally change the way financial markets and institutions operate. One of these changes is a greater reliance on hard relative to soft information in financial transactions. This paper discusses the advantages and costs of this substitution and the possible consequences of the hardening of information on both financial markets and institutions as well as those who study them.
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Full text of paper (Adobe Acrobat Format) |
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Last Revision: July, 2004 |
Slides for
the talk at Studienzentrum Gerzensee entitled "Hard and Soft Information:
Implications for Banking and Finance Research"
3) Premature De-escalation in Response to Failed Investment: A Test of Escalating Commitment, Marginal Decision-making, and Mental Budgeting (joint with Chip Heath)
ABSTRACT:
Using sophisticated subjects in an environment that should make the norms of economic behavior highly salient (MBAs in a corporate finance class), we test three theories about how people respond to previous investments: escalating commitment, mental budgeting, and marginal decision making. The results support mental budgeting.
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Full text of paper (Adobe Acrobat Format) |
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Last Revision: January, 1996 |
4) Quote Revisions and The Quoted Size: An Empirical Analysis, (joint with Steve Umlauf)
ABSTRACT:
We examine the importance of the size quoted by the specialist in the adjustment of prices. The quoted size is the maximum trade size for which the posted quotes are guaranteed. We find that the impact of trades on subsequent quote revisions depends significantly on whether the trade size exceeds the quoted size. Although larger trades are followed by larger quote revisions, most of the variation in quote revisions is explained by whether the trade size exceeds the quoted size. Once it does, further increases in the trade size have no effect. Our results also indicate that only a fraction of trades move the quotes.
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Full text of paper (Adobe Acrobat Format) |
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Last Revision: June, 1994 |
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