dual role advisors and conflicts of interest

A dual role advisor is an investment bank that is advising the vendor client in an M&A transaction while simultaneously financing the bidder. I investigate whether dual role advising is good or bad for target shareholders through a comprehensive analysis of U.S. public M&A over the 15-year period from 1993 to 2008. Conflicts of interest are manifested through that deals which involve a dual role advisor are, compared to deals with no dual role advisors; (a) performed at lower premium, (b) more likely to be subject to a lawsuit, (c) feature lower merger advisor fees and (d) commensurate with higher announcement returns for bidders. Target firms with sound corporate governance practices are less likely to encounter dual role situations

Managers' cultural origin and corporate response to an economic shock

We exploit the exogenous Covid-19 shock in a bicultural area of Italy to identify cultural differences in the way companies respond to economic shocks. Firms with managers of diverse cultural backgrounds resort to different forms of government aid, diverge in their investment decisions, and have different growth rates. These findings are consistent with cultural differences in time preferences and debt aversion. Specifically, we find that the response of managers belonging to a more long-term oriented culture is characterized by a lower recourse to debt, more investments and higher growth rates. Overall, our results show that the cultural origin of managers significantly affects firms' reaction to economic shocks and real economic outcomes

Government awards as economic instruments of governance

International audienc

Government Involvement in the Corporate Governance of Banks

International audienceOn March 18, 1976, the Swedish parliament voted on a bill that, if approved, would have substantially increased both the scale and scope of government representation on bank boards. Since parliament was hung, the outcome of the vote was decided by a lottery. I exploit this lottery to study the causal effect on shareholder value of government involvement in the corporate governance of banks. I find that the rejection of the bill resulted in positive abnormal returns that persisted in the following days. The results suggest that unsolicited government involvement in the corporate governance of banks is harmful for owners

Replication data for: "Government Involvement in the Corporate Governance of Banks"

Siming, Linus, (2018) “Government Involvement in the Corporate Governance of Banks.” Review of Economics and Statistics 100:3, 477-488

Orders of Merit and CEO Compensation: Evidence from a Natural Experiment

Governments worldwide bestow orders of merit upon their citizens as a recognition of distinguished service. In this paper, I study whether orders of merit can function as an external form of perquisite through which the government can supplement the compensation given by a publicly listed firm to the CEO. I build upon the literature on perquisites to develop hypotheses on the relationship between orders of merit and executive compensation. The predictions are tested through an empirical analysis that revolves around the 1974 legal reform in which Sweden discontinued the conferral of orders of merit to citizens. The difference-in-differences methodology I employ enables me to make causal statements on the relationship between orders of merit, firm performance, and monetary compensation. I find that orders of merit function as symbols that visibly confirm social status vis-à-vis the general public and are valued by CEOs as a substitute for the need to engage in conspicuous consumption. This study provides empirical support that orders of merit can be seen as an external form of perquisite that can substitute for monetary compensation. Essentially, this is evidence that governments can affect CEO salaries through the provision of a non-monetary status good. The findings also indicate that CEOs not only care about distinguishing themselves as “superstars” among their peer group of corporate leaders but also value non-monetary symbols that emphasize their social status in relation to the general public

Private equity firms as market makers

In a study of 1,322 private-to-private transactions I find support for the hypothesis that private equity (PE) firms play an important role as market makers. A number of empirical results support this claim. Firstly, part of what PE firms do is to keep an inventory of firms on which they do little operational improvements. In cases where PE firms exit their investments in less than 18 months of ownership, so called quick flips, no statistically significant perating enhancing measures are observed. As time passes by the probability that an asset is sold to an industrial buyer in a trade sale is reduced. Overall, the results suggest that PE firms hold a menu of firms which they keep available to firstly industrial buyers and secondly for other PE firms

To Advocate or Not to Advocate: Determinants and Financial Consequences of CEO Activism

Chief executive officers (CEOs) who engage in activism take public stands on issues that are largely unrelated to the core business of their firms. This study assesses the impact of CEO activism on shareholder value and investigates potential drivers behind the decision to advocate. We conduct an event study centred on a particular episode of CEO activism: the resignation of a group of business leaders from their roles as advisors to President Trump. We choose this setting since activism is likely to have a stronger impact when a CEO is politically connected. However, by engaging in advocacy, a CEO risks severing the very same political links that underlie the strength of the message. We find that shareholders react negatively to the decision to quit a presidential advisory council, which is consistent with a fear of weakening their firms\u2019 political influence. The decision to publicly advocate seems to be driven more by a CEO\u2019s personal political ideology than by a company\u2019s general involvement in corporate social responsibility. We also observe that managers are more likely to take a stand when they are protected by their firm\u2019s corporate governance rules. This study provides empirical evidence of the risks associated with CEO activism

The mitigating effect of bank financing on shareholder value and firm policies following rating downgrades

International audienceWe document that shareholders of high-yield firms are less sensitive to credit rating downgrades the higher the proportion of bank financing in the firm. This positive effect is linked to firm behavior. In the year after the downgrade, high-yield firms with large bank debt ratios i) need to reduce their leverage less, and ii) display higher capital expenditures, compared to peers that rely relatively more on other sources of debt. Bank financing thus helps alleviate the adverse effects of rating downgrades on shareholders and firms in the high-yield segment. As such, one may view our findings as new evidence of the " specialness " and flexibility of bank debt