Essays on asymmetric information problems without the single-crossing property: applications to corporate finance

The objective of this dissertation is to re-examine classical issues in corporate finance, applying a new analytical tool. The single-crossing property, also called Spence-irrlees condition, is not required in the models developed here. This property has been a standard assumption in adverse selection and signaling models developed so far. The classical papers by Guesnerie and Laffont (1984) and Riley (1979) assume it. In the simplest case, for a consumer with a privately known taste, the single-crossing property states that the marginal utility of a good is monotone with respect to the taste. This assumption has an important consequence to the result of the model: the relationship between the private parameter and the quantity of the good assigned to the agent is monotone. While single crossing is a reasonable property for the utility of an ordinary consumer, this property is frequently absent in the objective function of the agents for more elaborate models. The lack of a characterization for the non-single crossing context has hindered the exploration of models that generate objective functions without this property. The first work that characterizes the optimal contract without the single-crossing property is Araújo and Moreira (2001a) and, for the competitive case, Araújo and Moreira (2001b). The main implication is that a partial separation of types may be observed. Two sets of disconnected types of agents may choose the same contract, in adverse selection problems, or signal with the same levei of signal, in signaling models.

Non-monotone insurance contracts and their empirical consequences

The goal of this paper is to show the possibility of a non-monotone relation between coverage ans risk which has been considered in the literature of insurance models since the work of Rothschild and Stiglitz (1976). We present an insurance model where the insured agents have heterogeneity in risk aversion and in lenience (a prevention cost parameter). Risk aversion is described by a continuous parameter which is correlated with lenience and for the sake of simplicity, we assume perfect correlation. In the case of positive correlation, the more risk averse agent has higher cosr of prevention leading to a higher demand for coverage. Equivalently, the single crossing property (SCP) is valid and iplies a positive correlation between overage and risk in equilibrium. On the other hand, if the correlation between risk aversion and lenience is negative, not only may the SCP be broken, but also the monotonocity of contracts, i.e., the prediction that high (low) risk averse types choose full (partial) insurance. In both cases riskiness is monotonic in risk aversion, but in the last case there are some coverage levels associated with two different risks (low and high), which implies that the ex-ante (with respect to the risk aversion distribution) correlation between coverage and riskiness may have every sign (even though the ex-post correlation is always positive). Moreover, using another instrument (a proxy for riskiness), we give a testable implication to desentangle single crossing ans non single croosing under an ex-post zero correlation result: the monotonicity of coverage as a function os riskiness. Since by controlling for risk aversion (no asymmetric information), coverage is monotone function of riskiness, this also fives a test for asymmetric information. Finally, we relate this theoretical results to empirical tests in the recent literature, specially the Dionne, Gouruéroux and Vanasse (2001) work. In particular, they found an empirical evidence that seems to be compatible with asymmetric information and non single crossing in our framework. More generally, we build a hidden information model showing how omitted variables (asymmetric information) can bias the sign of the correlation of equilibrium variables conditioning on all observable variables. We show that this may be the case when the omitted variables have a non-monotonic relation with the observable ones. Moreover, because this non-dimensional does not capture this deature. Hence, our main results is to point out the importance of the SPC in testing predictions of the hidden information models.

Do dividends signal more earnings?

Signaling models have contributed to the corporate finance literature by formalizing "the informational content of dividends" hypothesis. However, these models are under criticism of empirical literature, as weak evidences were found supporting one of the main predicitions: the positive relation between changes in dividends and changes in earnings. We claim thaht the failure to verify this prediction does not invalidate the signaling approach. The models developed up to now assume or derive utility functions with the single-crossing property. We show thaht signaling is possible in the absence of this property and, in this case, changes in dividend and changes in earnings can be positively or negatively related.

Non-monotone insurence contracts and their empirical consequences

The goal of t.his paper is to show the possibility of a non-monot.one relation between coverage and risk which has been considered in the literature of insurance models since the work of Rothschild and Stiglitz (1976). We present an insurance model where the insured agents have heterogeneity in risk aversion and in lenience (a prevention cost parameter). Risk aversion is described by a continuou.'l parameter which is correlated with lenience and, for the sake of simplicity, we assume perfect correlation. In the case of positive correlation, the more risk averse agent has higher cost of prevention leading to a higher demand for coverage. Equivalently, the single crossing property (SCP) is valid and implies a positive correlation between coverage and risk in equilibrium. On the other hand, if the correlation between risk aversion and lenience is negative, not only may the sep be broken, but also the monotonicity of contracts, i.e., the prediction that high (Iow) risk averse types choose full (partial) insurance. In both cases riskiness is monotonic in risk aversion, but in the last case t,here are some coverage leveIs associated with two different risks (low and high), which implies that the ex-ante (with respect to the risk aversion distribution) correlation bet,ween coverage and riskiness may have every sign (even though the ex-post correlation is always positive). Moreover, using another instrument (a proxy for riskiness), we give a testable implication to disentangle single crossing and non single crossing under an ex-post zero correlation result: the monotonicity of coverage as a function of riskiness. Since by controlling for risk aversion (no asymmetric informat, ion), coverage is a monotone function of riskiness, this also gives a test for asymmetric information. Finally, we relate this theoretical results to empirica! tests in the recent literature, specially the Dionne, Gouriéroux and Vanasse (2001) work. In particular, they found an empirical evidence that seems to be compatible with asymmetric information and non single crossing in our framework. More generally, we build a hidden information model showing how omitted variabIes (asymmetric information) can bias the sign of the correlation of equilibrium variabIes conditioning on ali observabIe variabIes. We show that this may be t,he case when the omitted variabIes have a non-monotonic reIation with t,he observable ones. Moreover, because this non-monotonic reIat,ion is deepIy reIated with the failure of the SCP in one-dimensional screening problems, the existing lit.erature on asymmetric information does not capture t,his feature. Hence, our main result is to point Out the importance of t,he SCP in testing predictions of the hidden information models.

Do dividends signal more earnings? a theoretical analysis

The signaling models have contributed to the literature of corporate finance by the formalization of "the informational content of dividends hypothesis". However, these models are under criticism of empirical works, as weak evidences were found supporting one of the main predictions: the positive relation between changes in dividends and changes in earnings. We claim that the failure to verify this prediction does not invalidate the signaling approach. The mo deIs developed up to now assume or derive utility functions with the single-crossing property. We show that signaling is possible in the absence of this property and, in this case, changes in dividend and changes in earnings can be positively or negatively related.

A partial ordering of knots and links through diagrammatic unknotting

In this paper we de. ne a partial ordering of knots and links using a special property derived from their minimal diagrams. A link K' is called a predecessor of a link K if Cr(K') < Cr(K) and a diagram of K' can be obtained from a minimal diagram D of K by a single crossing change. In such a case, we say that K' < K. We investigate the sets of links that can be obtained by single crossing changes over all minimal diagrams of a given link. We show that these sets are specific for different links and permit partial ordering of all links. Some interesting results are presented and many questions are raised.

Understanding the Impact of the Property Tax Appeal Process on Assessment Uniformity: Procedures, Structures, and Outcomes

Property taxes serve as a vital revenue source for local governments. The revenues derived from the property tax function as the primary funding source for a variety of critical local public service systems. Property tax appeal systems serve as quasi-administrative-judicial mechanisms intended to assure the public that property tax assessments are correct, fair, and equitable. Despite these important functions, there is a paucity of empirical research related to property tax appeal systems. This study contributes to property tax literature by identifying who participates in the property tax appeal process and examining their motivations for participation. In addition, the study sought to determine whether patterns of use and success in appeal systems affected the distribution of the tax burden. Data were collected by means of a survey distributed to single-family property owners from two Florida counties. In addition, state and county documents were analyzed to determine appeal patterns and examine the impact on assessment uniformity, over a three-year period. The survey data provided contextual evidence that single-family property owners are not as troubled by property taxes as they are by the conduct of local government officials. The analyses of the decision to appeal indicated that more expensive properties and properties excluded from initial uniformity analyses were more likely to be appealed, while properties with homestead exemptions were less likely to be appealed. The value change analyses indicated that appeals are clustered in certain geographical areas; however, these areas do not always experience a greater percentage of the value changes. Interestingly, professional representation did not increase the probability of obtaining a reduction in value. Other relationships between the variables were discovered, but often with weak predictive ability. Findings from the assessment uniformity analyses were also interesting. The results indicated that the appeals mechanisms in both counties improved assessment uniformity. On average, appealed properties exhibited greater horizontal and vertical inequities, as compared to non-appealed properties, prior to the appeals process. After, the appeal process was completed; the indicators of horizontal and vertical equity were largely improved. However, there were some indications of regressivity in the final year of the study.

F-LQE: a Fuzzy Link Quality Estimator for wireless sensor networks

Radio Link Quality Estimation (LQE) is a fundamental building block for Wireless Sensor Networks, namely for a reliable deployment, resource management and routing. Existing LQEs (e.g. PRR, ETX, Fourbit, and LQI ) are based on a single link property, thus leading to inaccurate estimation. In this paper, we propose F-LQE, that estimates link quality on the basis of four link quality properties: packet delivery, asymmetry, stability, and channel quality. Each of these properties is defined in linguistic terms, the natural language of Fuzzy Logic. The overall quality of the link is specified as a fuzzy rule whose evaluation returns the membership of the link in the fuzzy subset of good links. Values of the membership function are smoothed using EWMA filter to improve stability. An extensive experimental analysis shows that F-LQE outperforms existing estimators.

Nonclassical light revealed by the joint statistics of simultaneous measurements

Nonclassicality cannot be a single-observable property, since the statistics of any quantum observable is compatible with classical physics. We develop a general procedure to reveal nonclassical behavior of light states from the joint statistics arising in the practical measurement of multiple observables. Beside embracing previous approaches, this protocol can disclose nonclassical features for standard examples of classical-like behavior, such as SU(2) and Glauber coherent states. When combined with other criteria, this would imply that every light state is nonclassical.

Single acquisition electrical property mapping based on relative coil sensitivities: A proof-of-concept demonstration.

PURPOSE: All methods presented to date to map both conductivity and permittivity rely on multiple acquisitions to compute quantitatively the magnitude of radiofrequency transmit fields, B1+. In this work, we propose a method to compute both conductivity and permittivity based solely on relative receive coil sensitivities ( B1-) that can be obtained in one single measurement without the need to neither explicitly perform transmit/receive phase separation nor make assumptions regarding those phases. THEORY AND METHODS: To demonstrate the validity and the noise sensitivity of our method we used electromagnetic finite differences simulations of a 16-channel transceiver array. To experimentally validate our methodology at 7 Tesla, multi compartment phantom data was acquired using a standard 32-channel receive coil system and two-dimensional (2D) and 3D gradient echo acquisition. The reconstructed electric properties were correlated to those measured using dielectric probes. RESULTS: The method was demonstrated both in simulations and in phantom data with correlations to both the modeled and bench measurements being close to identity. The noise properties were modeled and understood. CONCLUSION: The proposed methodology allows to quantitatively determine the electrical properties of a sample using any MR contrast, with the only constraint being the need to have 4 or more receive coils and high SNR. Magn Reson Med, 2014. © 2014 Wiley Periodicals, Inc.

Ligand Design for Dual Property Single Molecule Magnets

This thesis describes two different approaches for the preparation of polynuclear clusters with interesting structural, magnetic and optical properties. Firstly, exploiting p-tert-butylcalix[4]arene (TBC4) macrocycles together with selected Ln(III) ions for the assembly of emissive single molecule magnets, and secondly the preparation and coordination of a chiral mpmH ligand with selected 3d transition metal ions, working towards the discovery of chiral polynuclear clusters. In Project 1, the coordination chemistry of the TBC4 macrocycle together with Dy(III) and Tb(III) afforded two Ln6[TBC4]2 complexes that have been structurally, magnetically and optically characterized. X-ray diffraction studies reveal that both complexes contain an octahedral core of Ln6 ions capped by two fully deprotonated TBC4 macrocycles. Although the unit cells of the two complexes are very similar, the coordination geometries of their Ln(III) ions are subtly different. Variable temperature ac magnetic susceptibility studies reveal that both complexes display single molecule magnet (SMM) behaviour in zero dc field and the energy barriers and associated pre-exponential factors for each relaxation process have been determined. Low temperature solid state photoluminescence studies reveal that both complexes are emissive; however, the f-f transitions within the Dy6 complex were masked by broad emissions from the TBC4 ligand. In contrast, the Tb(III) complex displayed green emission with the spectrum comprising four sharp bands corresponding to 5D4 → 7FJ transitions (where J = 3, 4, 5 and 6), highlighting that energy transfer from the TBC4 macrocycle to the Tb(III) ion is more effective than to Dy. Examples of zero field Tb(III) SMMs are scarce in the chemical literature and the Tb6[TBC4]2 complex represents the first example of a Tb(III) dual property SMM assembled from a p-tert-butylcalix[4]arene macrocycle with two magnetically derived energy barriers, Ueff of 79 and 63 K. In Project 2, the coordination of both enantiomers of the chiral ligand, α-methyl-2-pyridinemethanol (mpmH) to Ni(II) and Co(II) afforded three polynuclear clusters that have been structurally and magnetically characterized. The first complex, a Ni4 cluster of stoichiometry [Ni4(O2CCMe3)4(mpm)4]·H2O crystallizes in a distorted cubane topology that is well known in Ni(II) cluster chemistry. The final two Co(II) complexes crystallize as a linear mixed valence trimer with stoichiometry [Co3(mpm)6]·(ClO4)2, and a Co4 mixed valence complex [Co(II)¬2Co(III)2(NO3)2(μ-mpm)4(ONO2)2], whose structural topology resembles that of a defective double cubane. All three complexes crystallize in chiral space groups and circular dichroism experiments further confirm that the chirality of the ligand has been transferred to the respective coordination complex. Magnetic susceptibility studies reveal that for all three complexes, there are competing ferro- and antiferromagnetic exchange interactions. The [Co(II)¬2Co(III)2(NO3)2(μ-mpm)4(ONO2)2] complex represents the first example of a chiral mixed valence Co4 cluster with a defective double cubane topology.

Sample stacking in CZE using dynamic thermal junctions I. Analytes with low dpK(a)/dT crossing a single thermally induced pH junction in a BGE with high dpH/dT

The possibility to compress analyte bands at the beginning of CE runs has many advantages. Analytes at low concentration can be analyzed with high signal-to-noise ratios by using the so-called sample stacking methods. Moreover, sample injections with very narrow initial band widths (small initial standard deviations) are sometimes useful, especially if high resolutions among the bands are required in the shortest run time. In the present work, a method of sample stacking is proposed and demonstrated. It is based on BGEs with high thermal sensitive pHs (high dpH/dT) and analytes with low dpK(a)/dT. High thermal sensitivity means that the working pK(a) of the BGE has a high dpK(a)/dT in modulus. For instance, Tris and Ethanolamine have dpH/dT = -0.028/degrees C and -0.029/degrees C, respectively, whereas carboxylic acids have low dpK(a)/dT values, i.e. in the -0.002/degrees C to+0.002/degrees C range. The action of cooling and heating sections along the capillary during the runs affects also the local viscosity, conductivity, and electric field strength. The effect of these variables on electrophoretic velocity and band compression is theoretically calculated using a simple model. Finally, this stacking method was demonstrated for amino acids derivatized with naphthalene-2,3-dicarboxaldehyde and fluorescamine using a temperature difference of 70 degrees C between two neighbor sections and Tris as separation buffer. In this case, the BGE has a high pH thermal coefficient whereas the carboxylic groups of the analytes have low pK(a) thermal coefficients. The application of these dynamic thermal gradients increased peak height by a factor of two (and decreased the standard deviations of peaks by a factor of two) of aspartic acid and glutamic acid derivatized with naphthalene-2,3-dicarboxaldehyde and serine derivatized with fluorescamine. The effect of thermal compression of bands was not observed when runs were accomplished using phosphate buffer at pH 7 (negative control). Phosphate has a low dpH/dT in this pH range, similar to the dK(a)/dT of analytes. It is shown that vertical bar dK(a)/dT-dpH/dT vertical bar >> 0 is one determinant factor to have significant stacking produced by dynamic thermal junctions.

Sample stacking in CZE using dynamic thermal junctions II: Analytes with high dpK(a)/dT crossing a single thermal junction in a BGE with low dpH/dT

In a previous work [M. Mandaji, et al., this issue] a sample stacking method was theoretically modeled and experimentally demonstrated for analytes with low dpK(a)/dT (analytes carrying carboxylic groups) and BGEs with high dpH/dT (high pH-temperature-coefficients). In that work, buffer pH was modulated with temperature, inducing electrophoretic mobility changes in the analytes. In the present work, the opposite conditions are studied and tested, i.e. analytes with high dpK(a)/dT and BGEs that exhibit low dpH/dT. It is well known that organic bases such as amines, imidazoles, and benzimidazoles exhibit high dpK(a)/dT. Temperature variations induce instantaneous changes on the basicity of these and other basic groups. Therefore, the electrophoretic velocity of some analytes changes abruptly when temperature variations are applied along the capillary. This is true only if BGE pH remains constant or if it changes in the opposite direction of pK(a) of the analyte. The presence of hot and cold sections along the capillary also affects local viscosity, conductivity, and electric field strength. The effect of these variables on electrophoretic velocity and band stacking efficacy was also taken into account in the theoretical model presented. Finally, this stacking method is demonstrated for lysine partially derivatized with naphthalene-2,3-dicarboxaldehyde. In this case, the amino group of the lateral chain was left underivatized and only the alpha amino group was derivatized. Therefore, the basicity of the lateral amino group, and consequently the electrophoretic mobility, was modulated with temperature while the pH of the buffer used remained unchanged.