Anti-Takeover Provisions as a Source of Innovation and Value Creation

Managers are risk averse. Excessive risk-aversion can destroy shareholder wealth. A key source of risk is the threat of an opportunistic takeover designed to take advantage of depressed market prices. This is especially the case in innovative or hard-to-value (`HtV') companies whose price may be depressed due to valuation difficulties rather than managerial under-performance. For these HtV firms, the threat of an opportunistic takeover can destroy value by inducing agency con icts of managerial risk aversion. managers and regulators argue that ATPs can ameliorate this problem. This article presents a theoretical model and empirical results that show that for HtV firms, ATPs encourage managers to make value-creating takeovers and increase innovation and do not induce agency con icts of managerial entrenchment. This implies that for innovative or hard-to-value firms, ATPs can ameliorate managerial risk aversion and encourage value-creation.

Value Creation in Venture Capital and Private Equity

This thesis examines the drivers of value-creation and value-destruction in venture capital (VC) and private equity (PE) funds. VC/PE funds have become an increasingly important financial intermediary. They are a key source of capital for young companies who might otherwise have difficulty raising funds from stock-markets or from lenders. VC/PE funds can also help larger companies to restructure and re-direct operations. However, not all VC/PE funds earn super-normal returns or succeed in fostering innovation and value-creation. Subsequently, this thesis examines the drivers of value-creation in VC/PE funds. This thesis highlights the skewness that is present in VC/PE funds returns. The thesis then examines the role of fund-level characteristics in determining VC/PE performance. The thesis focuses on the role of a fund s size and diversification. The thesis also examines typical incentive contracts between VC/PE funds and their investors, and shows that the traditional incentive schemes can lead to sub-optimal performance. The thesis then uses this background to examine the structure of Australia s Innovation Investment Fund scheme, which is designed to support VC funds in their investments in start-up companies. The main contributions of this thesis are to highlight the drivers of VC/PE fund performance and to propose ways to incentivize and select value-creating funds

Internal and External Discipline Following Securities Class Actions

Companies are sometimes accused of misleading the market. The SEC can punish this with enforcement actions. Alternatively, shareholders can seek redress through a shareholder class action (SCA). While some literature has examined SEC actions, it has not examined SCAs, and has not examined external discipline and the managers's future employment prospects after either action. Thus, using a sample of 416 securities class actions, this paper shows that SCAs are a catalyst to promote disciplinary takeovers, CEO/CFO turnover and CEO/CFO pay-cuts, and harm CEOs future job-prospects. This suggests that even if the law governing SCAs is sub-optimal, they can still induce internal and external discipline.

Optimal VWAP trading under noisy conditions

This article proposes an empirically tractable way to incorporate intra-day noise into a VWAP trading rule. In volatile markets, news arrives unexpectedly and rapidly. This should influence a trader's trading decisions. However, the literature has not incorporated such information into an algorithmic trading framework. Subsequently, this paper presents a Dynamic VWAP (DVWAP) framework that allows informed traders to utilize random news; and thus, improve trade-execution.VWAP strategies Algorithmic trading Intra-day volume

Firm size, takeover profitability, and the effectiveness of the market for corporate control: Does the absence of anti-takeover provisions make a difference?

The market for corporate control is generally regarded as an important disciplinary mechanism in well developed economies. Entrenchment mechanisms commonly used by US firms in the form of anti-takeover provisions (ATPs) may offer some protection from disciplinary action, facilitating entrenchment and value-reducing behavior. One manifestation of entrenchment is poor acquisitions, with the literature reporting significant losses to large acquirers, and to acquirers with a higher number of ATPs. We examine the profitability of acquisitions in Australia, a market where US-style ATPs are prohibited. The results show that unlike their US counterparts, large Australian acquirers earn significant value for their shareholders, both in terms of announcement returns and long-run operating performance improvements. Takeover premiums are also substantially lower than those reported for the US and UK, and do not differ between large and small acquirers. Premiums are also positively correlated with long-run operating performance, indicating that they reflect real synergies, as opposed to hubris or overpayment. We also find that bidders who destroy value in takeovers are likely to be subsequently acquired. However, unlike US evidence, larger acquirers are just as likely to be targeted for takeover as smaller acquirers, indicating that size is not an effective impediment to the disciplining function of the market for corporate control in Australia. The findings are robust to several econometric issues common to the type of models used in our analysis

Firm size, sovereign governance, and value creation: Evidence from the acquirer size effect

This paper examines the relationship between acquirer size, sovereign governance, and value-creation in acquisitions. Prior literature indicates that larger acquirers' acquisitions create less shareholder wealth in developed markets, arising primarily from agency and entrenchment problems. However, in weak governance environments, size might have off-setting benefits, including increased market power and political connections. We use a sample of 17,647 takeovers from 45 countries to examine the acquirer size effect around the world. We find that the acquirer size effect exists internationally, but is smaller in magnitude in weak governance markets. Compared with larger acquirers in strong governance countries, large acquirers in weak governance countries do takeovers that generate higher stock-returns and increase post-takeover operating performance. Their deals are also more likely to be friendly, and take less time to complete. We also find that the benefits of larger acquirer size increase with the importance of political connections in the acquirer's country. The results suggest that country-governance can moderate the impact of corporate characteristics, such as corporate size.Australian Research Counci