Empirical studies on share issuance and repurchase decisions

Financial constraints influence corporate policies of firms, including both investment decisions and external financing policies. The relevance of this phenomenon has become more pronounced during and after the recent financial crisis in 2007/2008. In addition to raising costs of external financing, the effects of financial crisis limited the availability of external financing which had implications for employment, investment, sale of assets, and tech spending. This thesis provides a comprehensive analysis of the effects of financial constraints on share issuance and repurchases decisions. Financial constraints comprise both internal constraints reflecting the demand for external financing and external financial constraints that relate to the supply of external financing. The study also examines both operating performance and stock market reactions associated with equity issuance methods. The first empirical chapter explores the simultaneous effects of financial constraints and market timing on share issuance decisions. Internal financing constraints limit firms’ ability to issue overvalued equity. On the other hand, financial crisis and low market liquidity (external financial constraints) restrict availability of equity financing and consequently increase the costs of external financing. Therefore, the study explores the extent to which internal and external financing constraints limit market timing of equity issues. This study finds that financial constraints play a significant role in whether firms time their equity issues when the shares are overvalued. The conclusion is that financially constrained firms issue overvalued equity when the external equity market or the general economic conditions are favourable. During recessionary periods, costs of external finance increase such that financially constrained firms are less likely to issue overvalued equity. Only unconstrained firms are more likely to issue overvalued equity even during crisis. Similarly, small firms that need cash flows to finance growth projects are less likely to access external equity financing during period of significant economic recessions. Moreover, constrained firms have low average stock returns compared to unconstrained firms, especially when they issue overvalued equity. The second chapter examines the operating performance and stock returns associated with equity issuance methods. Firms in the UK can issue equity through rights issues, open offers, and private placement. This study argues that alternative equity issuance methods are associated with a different level of operating performance and long-term stock returns. Firms using private placement are associated with poor operating performance. However, rights issues are found empirically to be associated with higher operating performance and less negative long-term stock returns after issuance in comparison to counterpart firms that issue private placements and open offers. Thus, rights issuing firms perform better than open offers and private placement because the favourable operating performance at the time of issuance generates subsequent positive long-run stock price response. Right issuing firms are of better quality and outperform firms that adopt open offers and private placement. In the third empirical chapter, the study explores the levered share repurchase of internally financially unconstrained firms. Unconstrained firms are expected to repurchase their shares using internal funds rather than through external borrowings. However, evidence shows that levered share repurchases are common among unconstrained firms. These firms display this repurchase behaviour when they have bond ratings or investment grade ratings that allow them to obtain cheap external debt financing. It is found that internally financially unconstrained firms borrow to finance their share repurchase when they invest more. Levered repurchase firms are associated with less positive abnormal returns than unlevered repurchase firms. For the levered repurchase sample, high investing firms are associated with more positive long-run abnormal stock returns than low investing firms. It appears the market underreact to the levered repurchase in the short-run regardless of the level of investments. These findings indicate that market reactions reflect both undervaluation and signaling hypotheses of positive information associated with share repurchase. As the firms undertake capital investments, they generate future cash flows, limit the effects of leverage on financial distress and ultimately reduce the risk of the equity capital.

Essays on cultural and institutional dynamics in economic development using spatial analysis

This thesis seeks to research patterns of economic growth and development from a number of perspectives often resonated in the growth literature. By addressing themes about history, geography, institutions and culture the thesis is able to bring to bear a wide range of inter-related literatures and methodologies within a single content. Additionally, by targeting different administrative levels in its research design and approach, this thesis is also able to provide a comprehensive treatment of the economic growth dilemma from both cross-national and sub-national perspectives. The three chapters herein discuss economic development from two broad dimensions. The first of these chapters takes on the economic growth inquiry by attempting to incorporate cultural geography within a cross-country formal spatial econometric growth framework. By introducing the global cultural dynamics of languages and ethnic groups as spatial network mechanisms, this chapter is able to distinguish economic growth effects accruing from own-country productive efforts from those accruing from interconnections within a global productive network chain. From this, discussions and deductions about the implications for both developed and developing countries are made as regards potentials for gains and losses from such types and levels of productive integration. The second and third chapters take a different spin to the economic development inquiry. They both focus on economic activity in Africa, tackling the relevant issues from a geo-intersected dimension involving historic regional tribal homelands and modern national and subnational administrative territories. The second chapter specifically focuses on attempting to adopt historical channels to investigate the connection between national institutional quality and economic development in demarcated tribal homelands at the fringes of national African borders. The third chapter on the other hand focuses on looking closer at the effects of demarcations on economic activity. It particularly probes how different kinds of demarcation warranted by two different but very relevant classes of politico-economic players have affected economic activity quite distinguishably within the resulting subnational regions in Africa.

Essays on the term structure of interest rates

This PhD thesis contains three main chapters on macro finance, with a focus on the term structure of interest rates and the applications of state-of-the-art Bayesian econometrics. Except for Chapter 1 and Chapter 5, which set out the general introduction and conclusion, each of the chapters can be considered as a standalone piece of work. In Chapter 2, we model and predict the term structure of US interest rates in a data rich environment. We allow the model dimension and parameters to change over time, accounting for model uncertainty and sudden structural changes. The proposed timevarying parameter Nelson-Siegel Dynamic Model Averaging (DMA) predicts yields better than standard benchmarks. DMA performs better since it incorporates more macro-finance information during recessions. The proposed method allows us to estimate plausible realtime term premia, whose countercyclicality weakened during the financial crisis. Chapter 3 investigates global term structure dynamics using a Bayesian hierarchical factor model augmented with macroeconomic fundamentals. More than half of the variation in the bond yields of seven advanced economies is due to global co-movement. Our results suggest that global inflation is the most important factor among global macro fundamentals. Non-fundamental factors are essential in driving global co-movements, and are closely related to sentiment and economic uncertainty. Lastly, we analyze asymmetric spillovers in global bond markets connected to diverging monetary policies. Chapter 4 proposes a no-arbitrage framework of term structure modeling with learning and model uncertainty. The representative agent considers parameter instability, as well as the uncertainty in learning speed and model restrictions. The empirical evidence shows that apart from observational variance, parameter instability is the dominant source of predictive variance when compared with uncertainty in learning speed or model restrictions. When accounting for ambiguity aversion, the out-of-sample predictability of excess returns implied by the learning model can be translated into significant and consistent economic gains over the Expectations Hypothesis benchmark.

Essays in asset price bubbles

This thesis studies the field of asset price bubbles. It is comprised of three independent chapters. Each of these chapters either directly or indirectly analyse the existence or implications of asset price bubbles. The type of bubbles assumed in each of these chapters is consistent with rational expectations. Thus, the kind of price bubbles investigated here are known as rational bubbles in the literature. The following describes the three chapters. Chapter 1: This chapter attempts to explain the recent US housing price bubble by developing a heterogeneous agent endowment economy asset pricing model with risky housing, endogenous collateral and defaults. Investment in housing is subject to an idiosyncratic risk and some mortgages are defaulted in equilibrium. We analytically derive the leverage or the endogenous loan to value ratio. This variable comes from a limited participation constraint in a one period mortgage contract with monitoring costs. Our results show that low values of housing investment risk produces a credit easing effect encouraging excess leverage and generates credit driven rational price bubbles in the housing good. Conversely, high values of housing investment risk produces a credit crunch characterized by tight borrowing constraints, low leverage and low house prices. Furthermore, the leverage ratio was found to be procyclical and the rate of defaults countercyclical consistent with empirical evidence. Chapter 2: It is widely believed that financial assets have considerable persistence and are susceptible to bubbles. However, identification of this persistence and potential bubbles is not straightforward. This chapter tests for price bubbles in the United States housing market accounting for long memory and structural breaks. The intuition is that the presence of long memory negates price bubbles while the presence of breaks could artificially induce bubble behaviour. Hence, we use procedures namely semi-parametric Whittle and parametric ARFIMA procedures that are consistent for a variety of residual biases to estimate the value of the long memory parameter, d, of the log rent-price ratio. We find that the semi-parametric estimation procedures robust to non-normality and heteroskedasticity errors found far more bubble regions than parametric ones. A structural break was identified in the mean and trend of all the series which when accounted for removed bubble behaviour in a number of regions. Importantly, the United States housing market showed evidence for rational bubbles at both the aggregate and regional levels. In the third and final chapter, we attempt to answer the following question: To what extend should individuals participate in the stock market and hold risky assets over their lifecycle? We answer this question by employing a lifecycle consumption-portfolio choice model with housing, labour income and time varying predictable returns where the agents are constrained in the level of their borrowing. We first analytically characterize and then numerically solve for the optimal asset allocation on the risky asset comparing the return predictability case with that of IID returns. We successfully resolve the puzzles and find equity holding and participation rates close to the data. We also find that return predictability substantially alter both the level of risky portfolio allocation and the rate of stock market participation. High factor (dividend-price ratio) realization and high persistence of factor process indicative of stock market bubbles raise the amount of wealth invested in risky assets and the level of stock market participation, respectively. Conversely, rare disasters were found to bring down these rates, the change being severe for investors in the later years of the life-cycle. Furthermore, investors following time varying returns (return predictability) hedged background risks significantly better than the IID ones.

Essays on the term structure of interest rates

This PhD thesis contains three main chapters on macro finance, with a focus on the term structure of interest rates and the applications of state-of-the-art Bayesian econometrics. Except for Chapter 1 and Chapter 5, which set out the general introduction and conclusion, each of the chapters can be considered as a standalone piece of work. In Chapter 2, we model and predict the term structure of US interest rates in a data rich environment. We allow the model dimension and parameters to change over time, accounting for model uncertainty and sudden structural changes. The proposed time-varying parameter Nelson-Siegel Dynamic Model Averaging (DMA) predicts yields better than standard benchmarks. DMA performs better since it incorporates more macro-finance information during recessions. The proposed method allows us to estimate plausible real-time term premia, whose countercyclicality weakened during the financial crisis. Chapter 3 investigates global term structure dynamics using a Bayesian hierarchical factor model augmented with macroeconomic fundamentals. More than half of the variation in the bond yields of seven advanced economies is due to global co-movement. Our results suggest that global inflation is the most important factor among global macro fundamentals. Non-fundamental factors are essential in driving global co-movements, and are closely related to sentiment and economic uncertainty. Lastly, we analyze asymmetric spillovers in global bond markets connected to diverging monetary policies. Chapter 4 proposes a no-arbitrage framework of term structure modeling with learning and model uncertainty. The representative agent considers parameter instability, as well as the uncertainty in learning speed and model restrictions. The empirical evidence shows that apart from observational variance, parameter instability is the dominant source of predictive variance when compared with uncertainty in learning speed or model restrictions. When accounting for ambiguity aversion, the out-of-sample predictability of excess returns implied by the learning model can be translated into significant and consistent economic gains over the Expectations Hypothesis benchmark.

Essays on robust mechanism design

Chapter 1: Under the average common value function, we select almost uniquely the mechanism that gives the seller the largest portion of the true value in the worst situation among all the direct mechanisms that are feasible, ex-post implementable and individually rational. Chapter 2: Strategy-proof, budget balanced, anonymous, envy-free linear mechanisms assign p identical objects to n agents. The efficiency loss is the largest ratio of surplus loss to efficient surplus, over all profiles of non-negative valuations. The smallest efficiency loss is uniquely achieved by the following simple allocation rule: assigns one object to each of the p−1 agents with the highest valuation, a large probability to the agent with the pth highest valuation, and the remaining probability to the agent with the (p+1)th highest valuation. When “envy freeness” is replaced by the weaker condition “voluntary participation”, the optimal mechanism differs only when p is much less than n. Chapter 3: One group is to be selected among a set of agents. Agents have preferences over the size of the group if they are selected; and preferences over size as well as the “stand-outside” option are single-peaked. We take a mechanism design approach and search for group selection mechanisms that are efficient, strategy-proof and individually rational. Two classes of such mechanisms are presented. The proposing mechanism allows agents to either maintain or shrink the group size following a fixed priority, and is characterized by group strategy-proofness. The voting mechanism enlarges the group size in each voting round, and achieves at least half of the maximum group size compatible with individual rationality.

Essays on educational production functions in England

Despite the expansion of the literature on the implications that different inputs have on the educational outcomes of students, empirical research has so far lacked the full capacity to provide unequivocal findings. Essentially, this deficiency is mainly attributed to two main factors; the lack of reliable data and the lack of full dimensionality in the theoretical model adopted to explain such data (Levaččićć and Vignoles, 2002; Knoeppel, Verstegen, and Rinehart, 2007). This dissertation aims to fill those gaps by first building a unique large dataset that covers all aspects of the educational process and second by adopting an integrated theoretical model and advanced quantitative methodological approaches to analyze it. With the fulfillment of such aim the dissertation manages to fill some of the gaps identified in the Education Economics literature related to the relationships between the cognitive and affective educational outcomes of English adolescents on one hand and three main inputs representing each of the three indentified factors in the theoretical model on the other hand controlling for other possible heterogeneities. Specifically, the thesis examines the effect of school process inputs in Chapter 2, family structure as a key family background input in Chapter 3 and finally religion and religiosity as a key adolescent’s personal input in Chapter 4.

Pre-colonial institutions and long-run development in Latin America

The present doctoral thesis studies the association between pre-colonial institutions and long-run development in Latin America. The thesis is organised as follows: Chapter 1 places the motivation of the thesis by underlying relevant contributions in the literature on long-run development. I then set out the main objective of the thesis, followed by a brief outline of it. In Chapter 2, I study the effects of pre-colonial institutions on present-day socioeconomic outcomes for Latin America. The main thesis of this chapter is that more advanced pre-colonial institutions relate to better socioeconomic outcomes today - principally, but not only, through their effects on the Amerindian population. I test such hypothesis with a dataset of 324 sub-national administrative units covering all mainland Latin American countries. The extensive range of controls covers factors such as climate, location, natural resources, colonial activities and pre-colonial characteristics - plus country fixed effects. Results strongly support the main thesis. In Chapter 3, I further analyse the association between pre-colonial institutions and present-day economic development in Latin America by using the historical ethnic homelands as my main unit of analysis. The main hypothesis is that ethnic homelands inhabited by more advanced ethnic groups -as measured by their levels of institutional complexity- relate to better economic development today. To track these long-run effects, I construct a new dataset by digitising historiographical maps allowing me to pinpoint the geospatial location of ethnic homelands as of the XVI century. As a result, 375 ethnic homelands are created. I then capture the levels of economic development at the ethnic homeland level by making use of alternative economic measures --satellite light density data. After controlling for country-specific characteristics and applying a large battery of geographical, locational, and historical factors, I found that the effects of pre-colonial institutions relate to a higher light density --as a proxy for economic activity- in ethnic homelands where more advanced ethnic groups lived. In Chapter 4, I explore a mechanism linking the persistence of pre-colonial institutions in Latin America over the long-run: Colonial and post-colonial strategies along with the ethnic political capacity worked in tandem allowing larger Amerindian groups to "support" the new political systems in ways that would benefit their respective ethnic groups as well as the population at large. This mechanism may have allowed the effects of pre-colonial institutions to influence socioeconomic development outcomes up to today. To shed lights on this mechanism, I combine the index of pre-colonial institutions prepared for the second chapter of the present thesis with individual-level survey data on people's attitudes. By controlling for key observable and unobservable country-specific characteristics, the main empirical results show that areas with a history of more advanced pre-colonial institutions increase the probability of individuals supporting present-day political institutions. Finally, in Chapter 5, I summarise the main findings of the thesis, and emphasise the key weaknesses of the study as well as potential avenues for future research.

“Something radically wrong somewhere”: the kindred of the Kibbo Kift, 1920-1932

This thesis examines the Kindred of the Kibbo Kift, a co-educational outdoors organisation that claimed to be a youth organisation and a cultural movement active from August 1920 to January 1932. Originally part of the Boy Scouts and Girl Guides, the Kibbo Kift offers rich insight into the interwar period in Britain specifically because it carried forward late Victorian and Edwardian ideology in how it envisioned Britain. Members constructed their own historical narrative, which endeavoured to place the organisation at the heart of British life. The organisation’s internal life revolved around the unique mythology members developed, and the movement aspired to regenerate Britain after the First World War physically and spiritually. This thesis argues Kibbo Kift was a distinctive movement that drew upon its members’ intellectual preoccupations and ideals and inspired its members to create unique cultural artefacts. While the Kibbo Kift was ultimately too politically ambiguous to have lasting political impact on a national scale, examining the organisation offers important insight into intellectual thought and cultural production during the British interwar period. This thesis charts the changes the organisation underwent through its membership and the different trends of intellectual thought brought in by individual members, such as its leader, John Hargrave, brought to the group. It examines the cultural production of the organisation’s unique mythology, which created a distinctive historical narrative. It surveys gender issues within the organisation through the “roof tree”, an experimental family unit, and the group’s increasing anti-feminism. Finally, it considers how Clifford H. Douglas’ economic theory of social credit caused the Kibbo Kift to transform into the Green Shirts Movement for Social Credit and later into the Social Credit Party of Great Britain and Northern Ireland.

A study on the effect of functional distribution of income on aggregate demand

In this thesis, we study the causal relationship between functional distribution of income and economic growth. In particular, we focus on some of the aspects that might alter the effect of the profit share on growth. After a brief introduction and literature review, the empirical contributions will be presented in Chapters 3,4 and 5. Chapter 3 analyses the effect of a contemporaneous decrease in the wage share among countries that are major trade partners. Falling wage share and wage moderation are a global phenomenon which are hardly opposed by governments. This is because lower wages are associated with lower export prices and, therefore, have a positive effect on net-exports. There is, however, a fallacy of composition problem: not all countries can improve their balance of payments contemporaneously. Studying the country members of the North America Free Trade Agreement, we find that the effect on export of a contemporaneous decrease in the wage share in Mexico, Canada and the United States, is negative in all countries. In other words, the competitive advantage that each country gains because of a reduction in its wage share (to which is associated a decrease in export prices), is offset by a contemporaneous increase in competitiveness in the other two countries. Moreover, we find that NAFTA is overall wage-led: the profit share has a negative effect on aggregate demand. Chapter 4 tests whether it is possible that the effect of the profit share on growth is different in the long run and in the short run. Following Blecker (2014) our hypothesis is that in the short run the growth regime is less wage-led than it is in the long run. The results of our empirical investigation support this hypothesis, at least for the United States over the period 1950-2014. The effect of wages on consumption increases more than proportionally compared to the effect of profits on consumption from the short to the long run. Moreover, consumer debt seem to have only a short-run effect on consumption indicating that in the long run, when debt has to be repaid, consumption depends more on the level of income and on how it is distributed. Regarding investment, the effect of capacity utilization is always larger than the effect of the profit share and that the difference between the two effects is higher in the long run than in the short run. This confirms the hypothesis that in the long run, unless there is an increase in demand, it is likely that firms are not going to increase investments even in the presence of high profits. In addition, the rentier share of profits – that comprises dividends and interest payments – has a long-run negative effect on investment. In the long run rentiers divert firms’ profits from investment and, therefore, it weakens the effect of profits on investment. Finally, Chapter 5 studies the possibility of structural breaks in the relationship between functional distribution of income and growth. We argue that, from the 1980s, financialization and the European exchange rate agreements weakened the positive effect of the profit share on growth in Italy. The growth regime is therefore becoming less profit-led and more wage-led. Our results confirm this hypothesis and also shed light on the concept of cooperative and conflictual regimes as defined by Bhaduri and Marglin (1990).

Hybridity in contemporary commercial organizations: implications for employee trust

This study advances the concept of organizational hybridity (OH). By doing so, it takes into account the individual level of analysis often neglected in organizational theory. More specifically, it aims to understand the implications of organizational hybridity for employees’ trust in contemporary commercial organizations. Informed and guided by current literature, this study argues that the current literature on organizational hybridity fails to adequately address the consequences of hybridity for employees' behaviour. The empirical study was conducted in 2014 using data collected via semi-structured interviews and document analysis. The study was based on a comparison of two case studies in Nigeria: Alter Securities Limited and Barak Petroleum Limited. A total of forty (40) interviews were conducted; twenty (20) from each organization. The data were analysed using thematic analysis. The main findings are that organizational hybridity in this study produced tensions that resulted in negative behavioural responses and employees’ distrust in the commercial hybrid organizations. However, employees’ identification with non-market orientated institutional logics such as family, philanthropic and religious logics is seen to facilitate their commitment, honesty, and trust in the organizations. Nevertheless, caution is required here as religious logics may also lead to an acceptance of unethical behaviour by employees. Overall, this study contributes to the literature on organizational hybridity by extending on Battilana and Lee’s (2014) framework, which highlights governance, leadership, organizational culture and intra-organizational relationships as core organizational attributes in the context of which issues may arise in commercial hybrid organizations. Furthermore, it addresses a gap in Besharov and Smith’s (2014) hybrid typology framework by providing an alternative line of argument focused on understanding how tensions manifest within commercial hybrid organizations. The key recommendations of this research underscore the need for commercial hybrid organizations to invest in mechanisms for improving employees’ trust so as to reap the benefits associated with trust. This could be achieved by involving employees in the decision-making process and clearly communicating the organizations’ values, so as to minimise the misinterpretation of the embodied institutional logics by employees.

The impact and control of malignant catarrhal fever in Tanzania

Malignant Catarrhal Fever (MCF), an often-lethal infectious disease, presents as a variable complex of lesions in susceptible ungulate species. The disease is caused by a -herpesvirus following transmission from an inapparent carrier host. Two major epidemiological forms exist: wildebeest-associated MCF (WA-MCF), in which the virus is transmitted to susceptible species by wildebeest calves less than approximately four months of age, and sheepassociated MCF (SA-MCF) in which the virus is spread by sheep (primarily adolescents). Due to the lack of an in-vitro propagation system for the causative agent of the more economically significant SA-MCF, and with the expectation that cross-protective immunity may be provided, vaccine development has focused on the more easily propagated alcelaphine herpesvirus-1 (AlHV-1) that causes WA-MCF. In 2008 a direct viral challenge trial showed that a novel vaccine, employing an attenuated AlHV-1 (atAlHV-1) `C5000 virus strain, protected British Friesian-Holstein (FH) cattle against an intranasal challenge with virulent AlHV-1 `C5000 virus. For cattle keeping people living near wildebeest calving areas in sub-Saharan Africa an effective vaccine would have value as it would release them from the costly annual disease avoidance strategy of having to move their herds away from the oncoming wildebeest. On the other hand, an effective vaccine will release herd owners from the need to avoid MCF, allowing them to graze their cattle alongside wildebeest on the highly nutritious pastures of the calving areas. As such conservationists have raised concerns that the development of a vaccine might lead to detrimental grazing competition. The principle objective of this study was to test the novel vaccine on Tanzanian shorthorn zebu cross cattle (SZC).We did this firstly using a natural challenge field trial (Chapter Two) which demonstrated that immunisation with the atAlHV-1 vaccine was well tolerated and induced an oro-nasopharyngeal AlHV-1-specific and -neutralising antibody response. This resulted in an immunity in SZC cattle that was partially protective and reduced naturally transmitted infection by 56%. We also demonstrated that non-fatal infections occurred with a much higher frequency than previously thought. Because the calculated efficacy of the vaccine was less than that seen in British FH cattle we wanted to determine whether host factors, particular to SZC cattle, had impacted the outcomes of the field trial. To do this we repeated the 2008 direct viral challenge trial using SZC cattle (Chapter Four). During this trial we also investigated whether the recombinant bacterial flagellin monomer (FliC), when used as an adjuvant, might improve the vaccine’s efficacy. The findings from this trial indicated that direct challenge with pathogenic AlHV-1 is effective at inducing MCF in SZC cattle and that FliC is not an appropriate adjuvant for this vaccine. Furthermore, with less control group cattle dying of MCF than expected we speculate that SZC cattle may have a degree of resistance to MCF that affords them protection from infection and developing fatal disease. In Chapter Three we investigated aspects of the epidemiology of MCF, specifically whether wildebeest placenta, long implicated by Maasai cattle owners as a source of MCF, might play a role in viral transmission. Additionally, through comparative sequence analysis, at two specific genes (A9.5 and ORF50) of wild-type and atAlHV-1, we investigated whether the `C5000 strain, the source of which was taken from Africa more than 40 years ago, was appropriate for vaccine development. The detection of AlHV-1 virus in approximately 50% of placentae indicated that infection can occur in-utero and that this tissue might play a role in disease transmission. And, despite describing three new alleles of the A9.5 gene (supporting previous evidence that this gene is polymorphic and encodes a secretory protein with interleukin-4 as the major homologue), the observation that the most frequently detected haplotypes, in both wild-type and attenuated AlHV-1, were identical suggests that AlHV-1 has a slow molecular clock and that the attenuated strain was appropriate for vaccine development. In Chapter Five we present the first quantitative assessment of the annual MCF avoidance costs that Maasai pastoralists incur. In particular we estimated that as a result of MCF avoidance 64% of the total daily milk yield during the MCF season was not available to be used by the 81% of the family unit remaining at the permanent boma. This represents an upper-bound loss of approximately 8% of a household0s annual income. Despite these considerable losses we concluded that, given an incidence of fatal MCF in cattle living in wildebeest calving areas of 5% to 10%, if herd owners were to stop trying to avoid MCF by allowing their cattle to graze alongside wildebeest, any gains made through increased availability of milk, improved body condition and reduced energy demands would be offset by an increase in MCF-incidence. With the development of an effective vaccine, however, this alternative strategy might become optimal. The overall conclusion we draw therefore is that, despite the substantial costs incurred each year avoiding MCF, the partial protection afforded by the novel vaccine strategy is not sufficient to warrant a wholesale change in disease avoidance strategy. Nonetheless, even the partial protection provided by this vaccine could be of value to protect animals that cannot be moved, for example where some of the herd remain at the boma to provide milk or where land-use changes make traditional disease avoidance difficult. Furthermore, the vaccine may offer a feasible solution to some of the current land-use challenges and conflicts, providing a degree of protection to valuable livestock where avoidance strategies are not possible, but with less risk of precipitating the potentially damaging environmental consequences, such as overgrazing of highly nutritious seasonal pastures, that might result if herd owners decide they no longer need to avoid wildebeest.