Tender offers versus block trades: empirical evidence

In this paper we test whether the determinant of a block trade and tender offer probabilities differ and whether the relative magnitude of the security and private benefits can explain the choice of transfer mode. We investigate the Swedish market for corporate control and use the wedge between cash flow rights and voting rights as a proxy for the incentives to extract private benefits. Our results indicate the importance of considering the control transfers through takeovers and block trades as two distinctive events. The likelihood of a public tender offer (block trade) decreases (increases) with the use of dual class shares. The results are consistent with our general hypothesis that the likelihood of block trades relative to public tender offers increases with the incumbent’s incentives to extract private benefits

Black Spots in Capital Structure Studies: The Case of Non-Existing Debt

This study focuses on what can be characterized as “black spots” in the existing studies - the selection issue, which is manifested in the fact that a nontrivial number of companies occasionally do not have any debt on their balance sheet. The problem of zero debt is akin to truncated and censored regression models, which are useful when the dependent variable is observed in some ranges but not in others. We find strong evidence that the results of the target adjustment studies of capital structure, which use fitted values of debt ratios, can be potentially biased due to failure to correct for censoring due to zero-leverage observations. This paper also looks at the issue of dynamic properties of capital structure choice and the persistence in the capital structure choice and examines the effect of the 2008 global financial crisis on Russian firms’ capital structure choice

Shifting balances of systemic risk in the Chinese banking sector: Determinants and trends

We examine the evolution and factors of systemic risk in the Chinese banking sector over the last decade from the perspective of domestic and international investors. We apply the SRISK measure of systemic risk to a representative sample of listed Chinese institutions that captures up to 60% of total banking assets and utilize the Granger-causality network-based approach to demonstrate interlinkages among Chinese banks beyond the largest financial institutions. We show a dramatic increase in systemic risk after 2011 and the increased contribution of small- and medium-sized banks. We also identify causal relationships from housing prices, economic policy uncertainty and shadow banking towards systemic risk and from shadow banking to housing prices. According to our results, the concerns from both domestic and international investors about the stability of the Chinese banking system are well justified and a systemic event could be caused by distress in a Chinese financial institution outside the group of the largest banks

Informal Practices in the Russian Private Sector

In the 1990s, Russia’s development emphasized reforming formal institutions. Yet the outcome of these reforms often depended on informal practices that both opposed and contributed to formal structures. These informal practices moderated some of the exigencies of transition, helping companies to exploit legal loopholes and optimize tax schemes. However, they also allowed companies to engage in asset stripping, share dilution, and transfer pricing, not to mention the limitation of shareholder voting rights and the abuse of Russia’s insolvency laws. While the Russian economy of today is much more stable and prosperous than it was 10 years ago, Russian businesses continue to require a high degree of informality to ‘get things done’. Informal practices persist because interpersonal trust compensates for popular distrust of state and financial institutions

No contagion from Russia toward global equity markets after the 2014 international sanctions

We examine the possibility of financial contagion from the Russian stock market toward 18 global markets as a result of the international sanctions arising from Russia's actions in Crimea. We develop a dynamic heteroskedastic procedure and use z-transform analysis to determine the potential degrees of contagion and explore possible volatility spillovers. Among our main results, the Russian market substantially decoupled from the vast majority of world markets, irrespectively of the strength of economic ties between Russia and the corresponding countries. Nonetheless, the crisis was characterized by large transmissions of volatility associated with the Russian stock market, particularly in emerging and frontier economies

Capital Structure and Oligarch Ownership

This study examines the effects of oligarch ownership on corporate capital structures. Using panel data from Ukraine, I find that oligarch-owned companies employ significantly more debt and liabilities than their peers. However, there is no direct relation between oligarch ownership and target capital structure. Whereas the determinants of target leverage are similar across all owners, differences in firm characteristics also have a fairly small effect. I show that larger leverage is due to better access to debt, which results in lower rebalancing costs and faster restructurings of oligarch-owned companies. The findings clearly suggest that oligarchs benefit from the accumulated advantages

Determinants of Cross-Border M&As and Shareholder Wealth Effects in a Globalized World

We analyze theoretical insights and empirical regularities related to factors determining the cross-border mergers and acquisitions (M&As) and impact of M&As on shareholder value of acquires and targets. The analysis of cross-border M&As is a relatively new subject and only recently received rigorous attention in academic research. Within this nascent literature, the survey pays particular attention to the emerging markets, which, in line with their growing role of in the global economy, became an increasingly important arena for cross-border M&As. The existing evidence point out to prevailing challenges in studying cross-border M&As by emerging markets firms. The results are often contradictory and tend to focus on a single country falling short of formally testing existing theories or developing comprehensive theories for emerging economies. We show that the type of factors increasing the value enhancing effects of M&As tends to be similar to the factors affecting the likelihood of M&As transactions. The remaining methodological challenges for the existing studies are related to strong evidence with respect to nonrandom selection of acquisition targets, which, among other “selection issues,” has important implications for choosing counterfactual evidence in order to appropriately compare pre- and postacquisition performance of firms