Empirical Essays in Corporate Finance and Financial Reporting

The thesis consists of four empirical studies in the areas of corporate finance and financial reporting. The first study examines CEOs’ familiarity with segments and how that familiarity affects their divestiture decisions. The results show that longer-tenured CEOs divest assets about half as often from familiar segments as from non-familiar segments. The study also shows that the familiarity effect is costly. The second study examines a firm’s selection procedure of financial advisors, including the choice of advisor nationality and experience, when making a cross-border acquisition. Characteristics of both the target and acquirer-nation, such as formalism, financial sophistication, and investor protection influence the acquirer’s choice of advisor nationality. Global- and target-country experience of an advisor serves as a substitute for the acquirer’s own cross-border acquisition experience, but advisors from either the target or acquirer nation create most value. The third study investigates management earnings forecasts disclosed by Dutch firms and how a cross listing in the US or UK influences managers’ forecast specificity choice and the ex post forecast errors. The results indicate that greater legal exposure and scrutiny causes firms to disclose less precise, but more accurate, forecasts. The final study examines analysts’ preferences for firms’ corporate financial reporting practices, which are confronted with the perceptions and actions of CFOs. Although we find that analysts’ views frequently correspond with those of CFOs, we also find some remarkable differences. Analysts tend to focus on long-term reporting strategies, while CFOs tend to make reporting decisions, and related investment and financing choices, with short-term consequences

Corporate Governance and Acquisitions: Acquirer Wealth Effects in the Netherlands

We examine 865 acquisitions by Dutch industrial firms over the period 1993–2004. Theoretical work based on principal–agent problems predicts that managers of exchange-listed corporations may pursue ac

The international diversification of banks and the value of their cross-border M&A advice

__Abstract__ We examine the impact of the international diversification by banks on the value of their advice provided in cross-border merger and acquisition transactions by studying bidder returns and deal performance following 1,708 cross-border M&A deals. We find that bidders engaging a more internationally diversified financial advisor face lower stock price and synergy returns, worse deal operating performance, and slower deal completion. We show that these negative effects of diversification can be mitigated by involvement in financing or country-specific available capacity of the advisor. [version: December 2013

The effect of cross listing on management forecast specificity and accuracy in the Netherlands

Abstract: We investigate management forecasts by Dutch firms in relation to cross listings by these firms in the US or the UK. Cross listings are associated with legal and reputational bonding, since firms with a cross listing in the US or the UK face greater legal liability exposure and closer scrutiny by financial intermediaries than do non-cross-listed firms. As a result, after obtaining the cross listing, these firms face greater potential costs of misrepresenting information. Our findings suggest that cross listing in a stricter environment influences management forecasts in terms of management forecast specificity, accuracy, and conservativeness in two opposite directions: although cross-listed firms make smaller forecast errors, their forecasts are less precise and more conservative. Our analysis of shareholder wealth effects shows that the net effect of the cross listing is positive upon the announcement of a management forecast

Bidder hubris and founder targets

__Abstract__ Overpayment for acquisitions can occur if managerial hubris leads bidders to overestimate target standalone values under their control. We provide a unique test of this phenomenon by analyzing whether bidders overpay for founder CEO targets because they overestimate their ability to replicate the value of the founder CEOs’ firm-specific human capital post-acquisition. We show that the founder CEOs’ human capital is valuable and embedded in the ex-ante targets’ value and is, economically and statistically, negatively associated with bidder gains and synergy returns. Our findings are consistent with bidders’ overestimating the value of founder CEO targets as stand-alone firms under their control. [version: December 2013

The demand for corporate financial reporting: A survey among financial analysts

Abstract: We examine financial analysts’ views on corporate financial reporting issues by means of a survey among 306 analysts and interviews among 21 analysts and compare their views with that of CFOs. Since CFOs believe that meeting or beating analysts’ forecasts and managing earnings to achieve this benchmark can enhance firm value, examining analysts’ perspectives on these actions improves our understanding on whether CFOs’ beliefs are rational or heuristic. Our findings suggest that CFOs’ beliefs tend to be rational regarding their focus on earnings and their views on earnings management and smoothing. The main reason is that analysts have difficulty in unraveling certain types of earnings management in a specific firm even though they anticipate earnings management in general. Yet, CFOs are heuristic in their optimism about the consequences of managing earnings, which potentially has negative implications for the value of their firm

Adaptation, spread and transmission of SARS-CoV-2 in farmed minks and related humans in the Netherlands

In the first wave of the COVID-19 pandemic (April 2020), SARS-CoV-2 was detected in farmed minks and genomic sequencing was performed on mink farms and farm personnel. Here, we describe the outbreak and use sequence data with Bayesian phylodynamic methods to explore SARS-CoV-2 transmission in minks and related humans on farms. High number of farm infections (68/126) in minks and farm related personnel (>50% of farms) were detected, with limited spread to the general human population. Three of five initial introductions of SARS-CoV-2 lead to subsequent spread between mink farms until November 2020. The largest cluster acquired a mutation in the receptor binding domain of the Spike protein (position 486), evolved faster and spread more widely and longer. Movement of people and distance between farms were statistically significant predictors of virus dispersal between farms. Our study provides novel insights into SARS-CoV-2 transmission between mink farms and highlights the importance of combing genetic information with epidemiological information at the animal-human interface

Does CEOs' familiarity with business segments affect their divestment decisions?

__Abstract__ We examine the impact of familiarity with business segments on CEOs’ divestment decisions. We find CEOs to be less likely to divest assets from familiar than from non-familiar segments. We attribute this effect to CEOs’ comparative information advantage relative to familiar segments. Reflecting this information advantage, we document the familiarity effect to be particularly strong in R&D intensive industries. We further find the familiarity effect to be most pronounced for longer-tenured CEOs who have built up sufficient political power over the course of several years in office to enable implementation of their preferred choices. We also document the value effects of divestments and show familiarity to affect returns on divestment announcements. [version: August 2013

Manifestation of SARS-CoV-2 Infections in Mink Related to Host-, Virus- and Farm-Associated Factors, The Netherlands 2020

SARS-CoV-2 outbreaks on 69 Dutch mink farms in 2020 were studied to identify risk factors for virus introduction and transmission and to improve surveillance and containment measures. Clinical signs, laboratory test results, and epidemiological aspects were investigated, such as the date and reason of suspicion, housing, farm size and distances, human contact structure, biosecurity measures, and presence of wildlife, pets, pests, and manure management. On seven farms, extensive random sampling was performed, and age, coat color, sex, and clinical signs were recorded. Mild to severe respiratory signs and general diseases such as apathy, reduced feed intake, and increased mortality were detected on 62/69 farms. Throat swabs were more likely to result in virus detection than rectal swabs. Clinical signs differed between virus clusters and were more severe for dark-colored mink, males, and animals infected later during the year. Geographical clustering was found for one virus cluster. Shared personnel could explain some cases, but other transmission routes explaining farm-to-farm spread were not elucidated. An early warning surveillance system, strict biosecurity measures, and a (temporary) ban on mink farming and vaccinating animals and humans can contribute to reducing the risks of the virus spreading and acquisition of potential mutations relevant to human and animal health

Adaptation, spread and transmission of SARS-CoV-2 in farmed minks and related humans in the Netherlands

In the first wave of the COVID-19 pandemic (April 2020), SARS-CoV-2 was detected in farmed minks and genomic sequencing was performed on mink farms and farm personnel. Here, we describe the outbreak and use sequence data with Bayesian phylodynamic methods to explore SARS-CoV-2 transmission in minks and related humans on farms. High number of farm infections (68/126) in minks and farm related personnel (>50% of farms) were detected, with limited spread to the general human population. Three of five initial introductions of SARS-CoV-2 lead to subsequent spread between mink farms until November 2020. The largest cluster acquired a mutation in the receptor binding domain of the Spike protein (position 486), evolved faster and spread more widely and longer. Movement of people and distance between farms were statistically significant predictors of virus dispersal between farms. Our study provides novel insights into SARS-CoV-2 transmission between mink farms and highlights the importance of combing genetic information with epidemiological information at the animal-human interface