Research

Working Papers

The Intangibles Song in Takeover Announcements: Good Tempo, Hollow Tune, with Alexander F. Wagner

R&R at The Review of Financial Studies

Mergers and acquisitions are often motivated by the intention of creating value from intangible assets. We develop a novel word list of intangibles and apply it to takeover announcements. The value of these deals to the acquirer, as shown by abnormal announcement returns, is questionable: One standard deviation more in intangibles talk lowers returns by 0.50 percentage points. Agency problems explain little of these results. Rather, the cross-section of announcement returns, payment mode choices, and insider trades suggest that intangibles talk reflects managerial overoptimism. In sum, takeover announcements reveal important information regarding the quality of deals.

Strategic M&A Announcement Timing: Evidence from Merger Monday

Drawing on the day of the week pattern of mergers and acquisitions, I investigate whether managers engage in strategic announcement timing, and if so, whether such a decision pays off. The findings are consistent with managers timing M&A announcements as they seek to avoid the anticipated unfavorable market reaction. I document that this strategy is related to higher stock returns when managers attempt to avoid periods of low investor attention. However, the analysis reveals no evidence of significant gains when the managerial decisive factor is the possibility that the market might interpret the announcement as bad news. Furthermore, I find that strategic timing and negotiation complexity help explain the prevalence of merger announcements on Mondays (the Merger Monday phenomenon) and its flip side, a low percentage of M&A announcements on Friday.

Dissecting IPO returns, with B. Seistrajkova

 alternative explanation of the IPO underpricing puzzle and show that the first-day market price is not a good proxy for the intrinsic value of the company. We find that IPOs are overpriced both by the underwriters in the primary market and the investors in the secondary market relative to their peers. To test our hypotheses we focus on the behavior of sophisticated participants in the secondary market: short sellers and analysts. The main driver of the first-day return is the overreaction of less informed investors to hot IPOs in the secondary market, while pressure from sophisticated investors to find lendable securities is pushing the price of the newly issued stock even to a higher level. Short interest on the first trading day is negatively linked to subsequent long-run stock returns and accounting performance of the IPOs. Our findings are consistent with the behavioral theories that assume presence of irrational (sentiment) investors.

Work in Progress

To treat or prevent pollution?, with C. Gentet-Raskopf (recently joined the project)

The paper examines whether and to what extent financial constraints play a role in situations where manufacturing firms must decide between investing in pollution prevention or pollution treatment.

M&As and firm complexity

The aim of this study is to deliver a comprehensive analysis of how firm and deal complexity impact M&A performance.

Stock markets and geopolitical risk, with W. Faris

The study is focused on understanding whether and how stock markets comprehend geopolitical risks when there is a high level of uncertainty.

Individual manager performance and gender diversity in the private equity industry, with S. Ain Tomar

Using unique data on private equity (PE) fund managers, the objective of this research is to understand the relation between managers' gender diversity and fund performance.

Firm life cycle and IPO returns, with J. Tresl

We analyze the effect of firm life cycle stages on the first-day IPO returns.