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In a multivariate context, the January effect appears most significantly related to excess individual liquidity (i.e., high cash balances and low expected taxes), but multicollinearity may obscure the relation between other variables and the effect. In a univariate context, prior February-December returns and the standard deviation of prior-year returns are most significantly related to the January effect. In both contexts, higher January volume and lower real interest rates are correlated with higher January returns. I find no evidence that window dressing by professional managers or macroeconomic seasonality (other than real interest rate seasonality) are significantly related to the January effect.

Lease financing is a well-recognized mechanism for reducing the agency costs of debt. This study examines whether firms that attempt to control the agency costs of equity through strong governance structures, including Chief Executive Officer compensation alignment and board structure, are more likely to use an agency cost reducing debt structure, such as leasing. For a sample of large firms, we find that firms who use more incentive compensation and have more outside directors also tend to use more lease financing, suggesting these agency cost reducing measures are complements. Copyright (c) 2008, The Eastern Finance Association.

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The authors examine risk pooling arrangements with moral hazard. Because of the nature of the risk pooling arrangement, full nominal coverage is shown to be optimal, despite the presence of moral hazard, and positive loss-prevention effort levels are induced even at full nominal coverage. When marginal utility is convex and higher-order utility effects are sufficiently small, as the number of members in the pool increases, the effort levels of members decrease and, as the pool size approaches infinity, effort levels approach zero. The latter result suggests that moral hazard may define an optimal size for risk pooling arrangements.Wondon Lee is with the

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