Merger failures

This paper proposes an explanation as to why some mergers fail, based on the interaction between the pre- and post-merger processes. We argue that failure may stem from informational asymmetries arising from the pre-merger period, and problems of cooperation and coordination within recently merged firms. We show that a partner may optimally agree to merge and abstain from putting forth any post-merger effort, counting on the other partner to make the necessary efforts. If both follow the same course of action, the merger goes ahead but fails. Our unique equilibrium allows us to make predictions on which mergers are more likely to fail.Mergers, Synergies, Asymmetric Information, Complementarities

Conglomeration with bankruptcy costs: Separate or joint financing?

The paper analyzes the determinants of the optimal scope of incorporation in the presence of bankruptcy costs. Bankruptcy costs alone generate a non-trivial tradeoff between the benefit of coinsurance and the cost of risk contamination associated to joint financing corporate projects through debt. This tradeoff is characterized for projects with binary returns, depending on the distributional characteristics of returns (mean, variability, skewness, heterogeneity, correlation, and number of projects), the bankruptcy recovery rate, and the tax rate advantage of debt relative to equity. Our testable predictions are broadly consistent with existing empirical evidence on conglomerate mergers, spin-offs, project finance, and securitization.Bankruptcy, conglomeration, mergers, spin-offs, project finance

Financial Incentives in Academia: Research versus Development

This paper investigates the effects of monetary rewards on the pattern of research. We build a simple repeated model of a researcher capable to obtain innovative ideas. We analyse how the legal environment affects the allocation of researcher?s time between research and development. Although technology transfer objectives reduce the time spent in research, they might also induce  researchers to conduct research that is more basic in nature, contrary to what the ?skewing problem? would presage. We also show that our results hold even if development delays publication.Faculty behaviour, basic vs. applied research

Composition of electricity generation portfolios, pivotal dynamics and market prices

We use a simulation model to study how the diversification of electricity generation portfolios influences wholesale prices. We find that technological diversification generally leads to lower market prices but that the relationship is mediated by the supply to demand ratio. In each demand case there is a threshold where pivotal dynamics change. Pivotal dynamics pre- and post-threshold are the cause of non-linearities in the influence of diversification on market prices. The findings are robust to our choice of behavioural parameters and match close-form solutions where those are available.Electricity, market power, simulations, technology diversification

Are agent-based simulations robust? The wholesale electricity trading case

Agent-based computational economics is becoming widely used in practice. This paper explores the consistency of some of its standard techniques. We focus in particular on prevailing wholesale electricity trading simulation methods. We include different supply and demand representations and propose the Experience-Weighted Attractions method to include several behavioural algorithms. We compare the results across assumptions and to economic theory predictions. The match is good under best-response and reinforcement learning but not under fictitious play. The simulations perform well under flat and upward-slopping supply bidding, and also for plausible demand elasticity assumptions. Learning is influenced by the number of bids per plant and the initial conditions. The overall conclusion is that agent-based simulation assumptions are far from innocuous. We link their performance to underlying features, and identify those that are better suited to model wholesale electricity markets.Agent-based computational economics, electricity, market design, experience-weighted attraction (EWA), learning, supply functions, demand aggregation, initial beliefs.

Theimpact of industry collaboration on research: Evidence from engineering academics in the UK

We study the impact of university-industry research collaborations on academic output, in terms of productivity and direction of research. We report findings from a longitudinal dataset on all the researchers from the engineering departments in the UK in the last 20 years. We control for the endogeneity caused by the dynamic nature of research and the existence of reverse causality. Our results indicate that researchers with industrial links publish significantly more. Productivity, though, is higher for low levels of industry involvement. Moreover, growing ties with the industry skew research towards a more applied approach.industry-science links, research collaborations, basic vs. applied research.

TV or not TV? Subtitling and English skills

We study the influence of television translation techniques on the quality of the English spoken across the EU and OCDE. We identify a large positive effect for subtitled original version as opposed to dubbed television, which loosely corresponds to between four and twenty years of compulsory English education at school. We also show that the importance of subtitled television is robust to a wide array of specifications. We then find that subtitling and better English skills have an influence on high-tech exports, international student mobility, and other economic and social outcomes.I21 i N00

Merger Clusters during Economic Booms

Merger activity is intense during economic booms and subdued during recessions. This paper provides a non-financial explanation for this observable pattern. We construct a model in which the target-by setting the takeover price-screens the acquirer on his (expected) ability to realize synergy gains when merging. In an economic boom, it is less profitable to sort out relatively "bad fit" acquirers, leading to a hike in merger activity. Although positive economic shocks produce expected gains at the time of merging, these mergers turn out to be less efficient in the long term-a finding that is broadly consistent with the existing empirical evidence. Furthermore, again because of the absence of boom-time screening, the more efficient acquirers earn higher merger profits during "merger waves" than outside of waves, which is also in line with empirical evidence. ZUSAMMENFASSUNG - (Fusionscluster in Boomphasen) In Zeiten wirtschaftlicher Hochkonjunktur ist die Zahl der Firmenzusammenschlüsse hoch, in Rezessionszeiten eher niedrig. Dieser Aufsatz gibt eine Erklärung für diese Beobachtung, die nicht auf rein finanzwirtschaftlichen Faktoren beruht. Im vorgestellten Modell ha das Unternehmen, welches übernommen wird, die Möglichkeit, den Übernahmepreis festzulegen und kann damit auch die übernehmende Firma auswählen. Das Auswahlkriterium sind die erwarteten Synergiegewinne im Falle einer Fusion, die für eine gute Passung der beiden fusionierenden Unternehmen sprechen. In Phasen der Hochkonjunktur ist es allerdings für Unternehmen generell interessant, zu fusionieren, und es wird relativ weniger profitabel, großen Auswahlaufwand zu treiben, um schlecht passende Fusionspartner auszusortieren und eventuell gar keinen Fusionspartner zu finden. Daher kommt es in diesen Zeiten zu mehr Fusionen als in anderen Konjunkturphasen, die als Fusionswellen bezeichnet werden. Zum Zeitpunkt der Fusion lassen sich auch die erwarteten Gewinne durch die günstige ökonomische Gesamtsituation realisieren. Im weiteren Verlauf stellen sich jedoch solche Fusionen mit schlecht passenden Partnern als wenig effizient heraus-was auch empirische Analysen bestätigt haben. Darüber hinaus zeigt das Modell, dass-wiederum wegen der fehlenden Auswahlprozedur in Boomphasen-die effizienteren Fusionspartner während Fusionswellen höhere Gewinne machen als außerhalb von Fusionswellen. Dies ist zuvor bereits empirisch beobachtet worden.Mergers, Merger Waves, Screening

Mergers, investment decisions and internal organisation

"Wir analysieren die Auswirkungen von Investitionsentscheidungen und internen Organisationsstrukturen auf die Effizienz und Stabilität von horizontalen Firmenzusammenschlüssen. In unserer Untersuchung sind Synergien endogen und es können interne Konflikte in dem fusionierten Unternehmen auftreten. Es zeigt sich, dass 'stabile' Fusionen häufig nicht zu mehr Effizienz, sondern sogar zu Effizienzverlusten führen können. Da solche Firmenzusammenschlüsse zu einer geringeren Wohlfahrt führen, sollte der Regulierer nicht ungeprüft annehmen, dass potentielle Wohlfahrtsgewinne auch immer tatsächlich erreicht werden. Außerdem bietet das Papier eine mögliche Erklärung für das Scheitern von Fusionen." (Autorenreferat)"We analyse the effects of investment decisions and firms' internal organisation on the efficiency and stability of horizontal mergers. In our framework synergies are endogenous and there might be internal conflict within merged firms. We show that often stable mergers do not lead to more efficiency and may even lead to efficiency losses. These mergers lead to lower welfare, suggesting that a regulator should be careful in assuming that possible efficiency gains of a merger will be effectively realised. Moreover, the paper offers a possible explanation for merger failures." (author's abstract

Research output from university-industry collaborative projects

We study collaborative and non-collaborative projects that are supported by government grants. First, we propose a theoretical framework to analyze optimal decisions in these projects. Second, we test our hypotheses with a unique dataset containing academic publications and research funds for all the academics at the major engineering departments in the UK. We find that the type of the project (measured by its level of appliedness) is increasing in the type of both the university and firm partners. Also, the quality of the project (number and impact of the publications) increases with the quality of the researcher and firm, and with the affinity in the partners’ preferences. The collaboration with firms increases the quality of the project only when the firms’ characteristics make them valuable partners