Buying to Sell: A Theory of Buyouts

Private equity owned firms have more leverage, more intense compensation contracts, and higher productivity than comparable firms. We develop a theory of buyouts in oligopolistic markets that explains these facts. Private equity firms are more aggressive in inducing restructuring compared to incumbents since they maximize a trade sale price. The equilibrium trade sale price increases in restructuring not only by increasing the profit of the acquirer, but also by decreasing the profits of non-acquiring firms. Predictions on the exit mode and on when private equity firms can outbid incumbents in the market for corporate control are also derived

Damage to tropical forests caused by cyclones is driven by wind speed but mediated by topographical exposure and tree characteristics

Each year, an average of 45 tropical cyclones affect coastal areas and potentially impact forests. The proportion of the most intense cyclones has increased over the past four decades and is predicted to continue to do so. Yet, it remains uncertain how topographical exposure and tree characteristics can mediate the damage caused by increasing wind speed. Here, we compiled empirical data on the damage caused by 11 cyclones occurring over the past 40 years, from 74 forest plots representing tropical regions worldwide, encompassing field data for 22,176 trees and 815 species. We reconstructed the wind structure of those tropical cyclones to estimate the maximum sustained wind speed (MSW) and wind direction at the studied plots. Then, we used a causal inference framework combined with Bayesian generalised linear mixed models to understand and quantify the causal effects of MSW, topographical exposure to wind (EXP), tree size (DBH) and species wood density (ρ) on the proportion of damaged trees at the community level, and on the probability of snapping or uprooting at the tree level. The probability of snapping or uprooting at the tree level and, hence, the proportion of damaged trees at the community level, increased with increasing MSW, and with increasing EXP accentuating the damaging effects of cyclones, in particular at higher wind speeds. Higher ρ decreased the probability of snapping and to a lesser extent of uprooting. Larger trees tended to have lower probabilities of snapping but increased probabilities of uprooting. Importantly, the effect of ρ decreasing the probabilities of snapping was more marked for smaller than larger trees and was further accentuated at higher MSW. Our work emphasises how local topography, tree size and species wood density together mediate cyclone damage to tropical forests, facilitating better predictions of the impacts of such disturbances in an increasingly windier world

Stock Splits: Signalling or Liquidity? The Case of Adr \u27Solo-Splits\u27

Stock splits are a common capital structure alteration which ought to have no effect on firm value in perfect capital markets. Empirical studies find that stock prices increase upon announcement of stock splits. The two traditional explanations for the rise in prices are information signaling on the part of managers and improved liquidity for shares that trade at lower prices. We investigate these explanations by studying splits of American Deposit Receipt (ADR) securities which are not associated with splits in the home country stock. We argue that these splits are likely to be motivated by the desire for liquidity improvements only. The results indicate that ADR prices rise by a statistically significant 1 to 2 percent at the announcement. We interpret this evidence as supportive of the liquidity explanation of stock split announcement effects

Hydraulic variability of tropical forests is largely independent of water availability

Tropical rainforest woody plants have been thought to have uniformly low resistance to hydraulic failure and to function near the edge of their hydraulic safety margin (HSM), making these ecosystems vulnerable to drought; however, this may not be the case. Using data collected at 30 tropical forest sites for three key traits associated with drought tolerance, we show that site-level hydraulic diversity of leaf turgor loss point, resistance to embolism (P50), and HSMs is high across tropical forests and largely independent of water availability. Species with high HSMs (>1 MPa) and low P50 values (< −2 MPa) are common across the wet and dry tropics. This high site-level hydraulic diversity, largely decoupled from water stress, could influence which species are favoured and become dominant under a drying climate. High hydraulic diversity could also make these ecosystems more resilient to variable rainfall regimes