The authors investigate how critics affect the box office performance of films and how the effects may be moderated by stars and budgets. The authors examine the process through which critics affect box office revenue, that is, whether they influence the decision of the film going public (their role as influencers), merely predict the decision (their role as predictors), or do both. They find that both positive and negative reviews are correlated with weekly box office revenue over an eight-week period, suggesting that critics play a dual role: They can influence and predict box office revenue. However, the authors find the impact of negative reviews (but not positive reviews) to diminish over time, a pattern that is more consistent with critics' role as influencers. The authors then compare the positive impact of good reviews with the negative impact of bad reviews to find that film reviews evidence a negativity bias; that is, negative reviews hurt performance more than positive reviews help performance, but only during the first week of a film's run. Finally, the authors examine two key moderators of critical reviews, stars and budgets, and find that popular stars and big budgets enhance box office revenue for films that receive more negative critical reviews than positive critical reviews but do little for films that receive more positive reviews than negative reviews. Taken together, the findings not only replicate and extend prior research on critical reviews and box office performance but also offer insight into how film studios can strategically manage the review process to enhance box office revenue.

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. . Wiley and Financial Management Association International are collaborating with JSTOR to digitize, preserve and extend access to Financial Management. M In recent years, with the wave of corporate defaults, it has become increasingly evident that asset management is at least as important as liability management. A dominant portion of a firm's time and resources is dedicated to managing working capital, and a major component of working capital is trade credit. Trade credit appears on both sides of the balance sheet. For the buyer, it is a source of financing through accounts payable, while for the seller, trade credit is an investment in accounts receivable. Although trade credit has long been an important source of financing for corporations, it is one of the least understood methods of doing business.1 Theories justifying trade credit have evolved in different but not mutually exclusive directions. Financially based models, as developed by Schwartz [14] and Emery [5], center on the "credit" aspect. Brick and Fung [4] have offered tax-based reasons for trade credit, while Emery [6] and Smith [15] have developed marketing models. Recently, Mian and Smith [13] discussed and documented four methods of financing trade credit: captive finance companies, factoring, accounts receivable secured debt, and general corporate debt. To date, however, there has been little empirical evidence explaining why and to what extent firms extend trade credit. The purpose of this paper is to extend the existing theories of trade credit and to provide relevant empirical evidence. We focus on the sellers' decision to extend trade The authors would like to thank Gary Emery, Ned Hill, Robert W. Johnson, Janet Smith, Keith Smith, Matt Spiegel and two anonymous referees for their helpful comments and suggestions. Previous versions of this paper were presented at the Pacific Basin Conference, the Financial Management Association Annual Meeting, the Cash Management Symposium and the Eastern Finance Association Annual Meeting. 1According to the 1991 Statistical Abstract of the United States, at the end of 1989 there was over 740 billion dollars outstanding in trade payables by nonfinancial corporations.

In this paper, we present a tax-induced framework to analyze debt maturity problems. We show that under some modifications of the existing U.S. tax code, debt maturity is irrelevant even in the presence of taxes and bankruptcy costs that yield an optimal capital structure. If this restrictive structure is relaxed, and assuming the Miller [15] equilibrium does not prevail, tax reasons would usually imply the existence of an optimal debt maturity structure. If there exists a gain from leverage, then an increasing term structure of interest rates, adjusted for default risk, results in long-term debt being optimal. A decreasing term structure, under similar circumstances, renders short-term debt optimal. In the absence of agency costs, a Miller [15]-type result emerges at equilibrium and irrelevance prevails. We also argue that agency costs could again reverse the irrelevance and imply a firm-specific optimal debt maturity structure. THERE HAS BEEN EXTENSIVE discussion in the literature concerning the existence of an optimal debt maturity structure. Kraus [13] states, without proof, that efficient capital markets preclude the existence of an optimal debt maturity. Stiglitz [20] demonstrates the irrelevance of debt maturity, but in an economic environment in which the entire financing decision is irrelevant due to the absence of taxes and bankruptcy costs. In contrast, Morris [16] argues that the issuance of short-term debt can reduce the risk to stockholders and thereby increase equity value, if the covariance between the net operating income and future interest rates is positive. This result by Morris is obtained even in the absence of taxes and when there is no probability of default. The discrepancy between Morris and Stiglitz arises because Morris uses the Bogue and Roll [31 multiperiod Capital Asset Pricing Model to incorporate uncertain future interest rates, which implicitly assumes that investors cannot diversify away intertemporal risk (see Fama [10]). Stiglitz's complete market framework, on the other hand, allows intertemporal risk diversification.Myers [18], and Barnea, Haugen, and Senbet [1] argue that agency costs associated with debt result in the existence of an optimal debt maturity structure. In particular, short-term debt resolves the conflict of interest between stockholders and bondholders that arises due to informational asymmetry and moral hazard. However, Barnea, Haugen, and Senbet [1] also demonstrate that agency , in Fontainebleau, France. Section I of the paper is an outgrowth of the first author's Ph.D. dissertation, and he thanks his thesis adviser, Jim Scott, for his helpful comments. We also thank participants of the Finance workshops of University of Southern California and Haifa University. Special thanks are due to Lemma Senbet. 1424The Journal of Finance costs can be equivalently reduced by offering callable and convertible bonds. This equivalence between a short-term debt maturity structure and long-term bonds with appropriate call option features implies that the debt maturity str...