Working papers

Corporate events
The timing of corporate event waves

Executive compensation
Getting rich by getting fired? An analysis of severance pay contracts

Analyst behavior
Is there life after loss of analyst coverage?
Independents' Day? Analyst behavior surrounding the Global Settlement
Analyst coverage and corporate transparency

Expropriation
The helping hand, the lazy hand, or the grabbing hand? Government shareholders in publicly listed firms in China

Miscellaneous
When is cheap talk valuable? The Case of the INSEAD Ball Ticket Market
Do bidders hire top-tier investment banks to certify value?

The timing of corporate event waves

Corporate events happen in waves. In this paper, we examine the timing patterns of five different types of corporate event waves (new stock and seasoned equity issues, stock and cash-financed acquisitions, and stock repurchases) using a comprehensive dataset of more than 151,000 corporate transactions over the 25-year period 1980-2004. We document a distinctive pattern, previously undocumented in the literature, in the way waves form. Corporate waves seem to start with new issue waves (SEO preceding IPO waves), followed by merger (both stock and cash-financed) waves, followed in turn by repurchase waves. Our results hold over separate decades and across industries. Overall, our results suggest that corporate event waves begin with strong fundamentals and managers and investors end up over-reacting to these fundamentals as the waves progress.

Is there life after loss of analyst coverage?

This paper examines why sell-side analysts choose to terminate research coverage on a firm and the consequences of the coverage loss for that firm. Using a sample of 2,753 firms, over the period from 1983 through 2004, that lose all analyst coverage, we find that analysts tend to drop coverage of firms that are unlikely to provide future investment banking and trading revenues to the financial institution analysts work for. Subsequent to the loss in coverage, we find sample firms are significantly more likely to get delisted than control firms matched on the propensity to go bankrupt or to generate investment banking and trading business. Our results shed light on the importance of analyst coverage to firms and the underlying incentives of the analyst community in providing research.

Independents' Day? Analyst behavior surrrounding the Global Settlement

In this paper we examine differences in the behavior of analysts at investment banks, pure brokerages and independent research firms in the period before and after the Global Settlement. We find that the Global Settlement has had no impact on analyst forecast accuracy and optimism. However, it has had a major impact on the proportion of buy recommendations issued by the analysts. Before the Settlement, analysts at independent research firms issued the lowest proportion of buy recommendations. After the Settlement, the proportion of buy recommendations fell across the board, with analysts at investment banks now being the least likely to issue buy recommendations. The Settlement had no impact on market reactions to the recommendation changes by analysts. Across both pre- and post-Settlement periods, analysts at independent research firms are treated as least informative by the market. Our overall findings question whether investors will be better served via a proposed shift in equity research to analysts at independent research firms.

The helping hand, the lazy hand, or the grabbing hand? Government shareholders in publicly listed firms in China

We analyze related party transactions between Chinese publicly listed firms and their state-owned enterprise (SOEs) shareholders to answer three questions. Do companies always benefit from the presence of government shareholders? Are government shareholders inefficient in maximizing shareholder value? Or do governments extract resources from companies, either to perform a social role or because they are corrupt? We find that related party transactions between firms and their government shareholders seem to result in the expropriation of the minority shareholders of the firm. The expropriation is concentrated in firms with the highest state ownership and controlled by local government SOEs, and in provinces where local government bureaucrats are less likely to be prosecuted for misappropriation of state funds. Overall, our results are most consistent with the grabbing hand model of government.

When is cheap talk valuable? The Case of the INSEAD Ball Ticket Market

This paper looks at a bizarre situation which occured in a student-operated market in INSEAD, a business school in Fontainebleau, France. INSEAD students host a summer ball every year, usually in chateaux and other exotic places. The tickets are usually oversubscribed and the prices for these tickets keeps increasing on the secondary market every year. In one year however, one student sent an e-mail saying that he did not believe in gouging his fellow students (as he believed that his friends were doing) by charging high prices for the ball tickets. This crashed the whole market. Why?

Do bidders hire top-tier investment banks to certify value?

In this paper, we investigate whether the composition of the board has any effect on the choice of the type of investment bank hired to advise the acquiror in a tender offer. The reason this question is interesting is because previous research has found that advisors in M&A are usually paid up to 80% of their fees if the acquisition is completed, irrespective of whether it actually adds value to the acquiror. Also my research has found that the market share of an investment bank depends on the number of deals it has completed, not on how good those deals are for the acquiror. So why should an acquiror hire an investment bank with such a incentive structure? Is it related to the board composition? If there are more independent directors on the board, for example, will management be allowed to use such structures?