Managerial turnover and leverage under a takeover threat

How do shareholders perceive managers who lever up under a takeover threat? Increasing leverage conveys good news if it reflects management's ability to enhance value. It conveys bad news, though, if inefficient managers are more pressured to lever up. This paper demonstrates that negative (positive) updating prevails when takeover costs are small (large). Managers who leve r up to end a takeover threat thus may commit to an increase in the firm's value and yet increase their chances of being replaced by their shareholders. The model predicts that intraindustry leverage is less dispersed when takeover costs are low.

R&D investment, international trade, and home market and competitiveness efects

We analyze the effects of R&D investment on international trade. The importance of studying this comes from the fact that one of the most important characteristics of modern industrial organization is that firms try to influence market behavior through strategic variables as R&D. Moreover international competition between firms is, more and more, also centered in R&D competition (besides output and price competition). With this in mind, we develop an oligopolist reciprocal-markets model where firms engage in R&D investment to achieve future reductions in marginal costs. We find ‘home market effects’ at the level of R&D investment, i.e.: firms located in countries that host a higher share of skilled-labor perform higher levels of R&D investment. As consequence, firms in these countries are more competitive than firms in other countries, and as such they can penetrate more easily foreign markets. As result of this ‘competitiveness effect’, countries where these firms are located run trade surplus, while countries where firms perform lower levels of R&D investment incur in trade deficits.

Predictable dividends and returns

The conventional wisdom is that the aggregate stock price is predictable by the lagged pricedividend ratio, and that aggregate dividends follow approximately a random-walk. Contrary to this belief, this paper finds that variation in the aggregate dividends and price-dividend ratio is related to changes in expected dividend growth. The inclusion of labor income in a cointegrated vector autoregression with prices and dividends allows the identification of predictable variation in dividends. Most of the variation in the price-dividend ratio is due to changes in expected returns, but this paper shows that part of variation is related to transitory dividend growth shocks. Moreover, most of the variation in dividend growth can be attributed to these temporary changes in dividends. I also show that the price-dividend ratio (or dividend yield) can be constructed as the sum of two distinct, but correlated, variables that separately predict dividend growth and returns. One of these components, which could be called the expected return state variable, predicts returns better than the price-dividend ratio does.

Modified value stream mapping of airport check-in procedures

In June 2014 Brazil hosted the FIFA World Cup and in August 2016 Rio de Janeiro hosts the Summer Olympics. These two seminal sporting events will draw tens of thousands of air travelers through Brazil’s airports, airports that are currently in the midst of a national modernization program to address years of infrastructure neglect and insufficient capacity. Raising Brazil’s major airports up to the standards air travelers experience at major airports elsewhere in the world is more than just a case of building or remodeling facilities, processes must also be examined and reworked to enhance traveler experience and satisfaction. This research paper examines the key interface between airports and airline passengers—airport check-in procedures—according to how much value and waste there is associated with them. In particular, the paper makes use of a value stream mapping construct for services proposed by Martins, Cantanhede, and Jardim (2010). The uniqueness of this construct is that it attributes each activity with a certain percentage and magnitude of value or waste which can then be ordered and prioritized for improvement. Working against a fairly commonly expressed notion in Brazil that Brazil’s airports are inferior to the airports of economically advanced countries, the paper examines Rio’s two major airports, Galeão International and Santos Dumont in comparison to Washington D.C.’s Washington National and Dulles International airports. The paper seeks to accomplish three goals: - Determine whether there are differences in airport passenger check-in procedures between U.S. and Brazilian airports in terms of passenger value - Present options for Brazilian government or private sector authorities to consider adopting or implementing at Brazilian airports to maximize passenger value - Validate the Martins et al. construct for use in evaluating the airport check-in procedures Observations and analysis proved surprising in that all airports and service providers follow essentially the same check-in processes but execute them differently yet still result in similar overall performance in terms of value and waste. Although only a few activities are categorized as completely wasteful (and therefore removed in the revised value stream map of check-in activities), the weighting and categorization of individual activities according to their value (or waste) presents decision-makers a means to prioritize possible corrective actions. Various overall recommendations are presented based on this analysis. Most importantly, this paper demonstrates the viability of using the construct developed by Martins et al to examine airport operations, as well as its applicability to the study of other service industry processes.

General (in-house) counsels in Brazil: career, professional profile and a new role

This paper discusses who the legal directors are in private companies in Brazil, emphasizing their profile, career, and performance, focusing on the period of 2008- 2013, investigating changes which have occurred to legal departments in those companies, and to legal directors’ careers. Our argument is that since the expansion of legal departments in Brazil in the 1990s, with expanding privatizing of companies and further opening of the Brazilian market to foreign capital, the profiles and careers of legal directors have undergone several transformations, culminating in more value and prestige being given to those professionals inside companies. This paper explores these transformations and the a series of implications generated for the corporate legal market in the country, ranging from changing the criteria for hiring professionals, to creating new demands for more sophisticated legal services.

Financial guarantees in Brazilian life insurance and pension plans

Recently regulated Brazilian life and pension products offer a benefit structure composed of minimum guaranteed annual rate, in°ation adjustment according to a price index and participation on an investment fund performance. We present a valuation model for these products. We establish a fair condition relationship between minimum guarantees and participation rates, and explore its behavior over a space of maturities, interest rates, and also fund and price index volatilities and correlation. Besides consistency to reference models, we found that the effect of the fund volatility is conditioned to the price index volatility level and the correlation between them.