The effect of a change in capital structure on the risk and return of common stockholders is investigated. Also, the information content of dividends when a firm goes for new outside financing is examined. Data used in the study are collected from the Moody's Bond Survey, the Prentice Hall's Capital Adjustments, the Wall Street Journal Index, and the Center for Research in Security Prices Tape. The study uses an event study methodology. The risk (beta) of common stock before an issuance of debt securities is compared with the risk after the issue. The stock market reaction to the issuance of new debt securities is measured using after-the-event risk. The information content of dividend announcement before a new debt issue is compared to that of after the issue. The findings show that debt issue reduces stock holders' risk if the issuer is a dividend paying company. Also, debt securities issued through an exchange offer increase stockholders' wealth. Finally, issuance of new debt does not affect the information content of dividends.

Catastrophe theory (CT) is a relatively new mathematical theory that comprehensively describes a system exhibiting discontinuous behavior when subjected to continuous stimuli. This study tests the theory using capital-market data. The data is a time series of stock returns on firms that filed for Chapter 11 reorganization during 1980-1985. The CT model used is based on a corporate failure model suggested by Francis, Hastings and Fabozzi (1983). The model predicts 1) as the filing date approaches, there will be a structural shift in the underlying stock-return generating process of the filing firm, and 2) firms with lower operating risk will have a smaller jump than firms with higher operating risk, corresponding to their relative positions within the bifurcation set of the catastrophe cusp.

The forces that shaped banking practices in the late 1970s and which fostered attempts by the banks to rapidly expand their markets are examined. Why, and to what extent, the Texas energy banks committed themselves to the oil industry in those years, as well as the effects of the oil industry's four-and-one-half year decline on the banks' financial strength is detailed. How banks structured loans to various energy borrowers and why these borrowers lost their ability to service their debts is analyzed. The changes that the Texas banks' painfully learned lessons will bring about in energy and other specialized lending is considered.

In this study, the possibility that money demand of one country might be affected by macroeconomic activities of other countries is investigated. We use the seemingly unrelated regression (SUR) technique, which takes into account all covariances between residuals of country-specific money demand equations. Efficiency of estimates using the SUR technique is enhanced because it uses information contained in the contemporaneous correlation of the error terms. The hypothesis of economic interdependence is tested. A proxy for foreign influence, deviation from interest rate parity (DIRP), is tested for significance in the money demand function.