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Using exogenous shocks on the ability to issue seasoned equity offerings (SEOs), we show SEOs lead to a higher employee skill composition, that is, a lower (higher) proportion of low (high) skilled workers. The decrease in low-skilled workers exceeds the increase in high-skilled workers, resulting in reduced employment at the firm level. These effects are more significant when firms invest more in technology following SEOs and face greater financial constraints before SEOs, suggesting that SEOs relieve budget constraints on technology investments. These findings demonstrate that while external equity financing helps upgrade technology to improve productivity, it has a dark side for low-skilled workers. [ABSTRACT FROM AUTHOR]

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jfineco.2005.04.003 Byline: Gerald F. Davis, E. Han Kim Keywords: Conflicts of interest; Proxy voting; Mutual funds; Employee pension plans Abstract: The magnitude of mutual funds' business ties with their portfolio firms is documented and is linked to funds' proxy votes at specific firms and to overall voting practices. Aggregate votes at the fund family level indicate a positive relation between business ties and the propensity to vote with management. Votes at specific firms, however, reveal that funds are no more likely to vote with management of client firms than of non-clients. Because the votes took place when funds knew their votes would be publicly scrutinized, fund families with a larger client base may have adopted voting policies that led to less frequent opposition to management at all firms. Author Affiliation: Stephen M. Ross School of Business, University of Michigan, Ann Arbor, MI 48109, USA Article History: Received 16 February 2005; Revised 28 March 2005; Accepted 5 April 2005 Article Note: (footnote) [star] We thank Bernard Black, Dana Muir, Adair Morse, Paige Ouimet, Amit Seru, Clemens Sialm, Lu Zheng, and participants of the Journal of Financial Economics/Ohio State University Conference on Agency Problems and Conflicts of Interest in Financial Markets and the finance seminar at the University of Michigan for helpful comments and suggestions. We are grateful for outstanding research assistance from Julian Atanassov, Sandra Gomez, and Amrita Nain in compiling the data on mutual fund proxy voting and we thank Joyce Buchanan for editorial help.

The important factors considered by economists while formulating the economic policies of different countries in the month of June, 2006 are discussed.

The article presents commentary about a paper written by Kose John and Avner Kalay (J&K) entitled "Costly Contracting and Optimal Payout Constraints," which appeared in the May, 1982 edition of the "Journal of Finance." The author finds J&K's work insightful, carefully presented, and mathematically rigorous, but also excessively technical and difficult to digest. He summarizes J&K's key findings and notes a few reservations he has, including J&K's assumption that there is a positive tax advantage to debt.

The article comments on a paper published within the issue, "Elimination of the Double Taxation of Dividends and Corporate Financial Policy," by Robert H. Litzenberger and James C. Van Horne. The author summarizes the paper by claiming the authors' have clearly demonstrated the inability to separately analyze capital structure decisions and dividend policy in the presence of differential personal income taxes and dividend paying firms. He also discusses Litzenberger and Van Horne's development of a multi-period state-preference model. The model incorporates differential personal income taxes by introducing a time state claim on taxable ordinary income and a time state claim on nontaxable wealth. The author feels that Litzenberger and Van Horne carry out a thorough and careful analysis of two alternative ways to eliminate the double taxation of dividends.

We find the confluence of CEO-same industry experience makes independent directors particularly helpful in enhancing value-added growth and we identify a channel: guidance toward higher value-added R&D investments and higher quality innovations. Further corroborating these inferences, we find greater improvement in value-added growth when (1) independent directors with industry-CEO experience (IDICEs) have experience in more similar industries; (2) they create more shareholder value as CEO; and (3) they are current CEOs. In addition, IDICEs contribute to value-added growth most when firm environments and characteristics are conducive for active board-management interaction; namely, when product markets are more competitive and dynamic, when outsiders can more easily acquire firmspecific information and when firms are younger and smaller. Consistent with our inferences on how IDICEs contribute to value-added growth, firms growing faster, less successfully innovating and/or under strong governance tend to be matched with IDICEs. [ABSTRACT FROM AUTHOR]