Guosong Xu is an Assistant Professor of Finance at Rotterdam School of Management at Erasmus University.
Corporate Finance, Behavioral Finance
Department of Finance, RSM
Mandeville Building T08-50, Burgemeester Oudlaan 50
3062 PA Rotterdam
The Role of Internal M&A Teams in Takeovers
Review of Finance, 2020, with Nihat Aktas, Audra Boone, Alexander Witkowski, and Burcin Yurtoglu
Determinants and Value Effects of Early Announcements in Takeovers
Journal of Corporate Finance, 2018, with Nihat Aktas and Burcin Yurtoglu
Best AFFI 2017 Conference Paper; Media coverage: Les Echos
We test the independence of news content from financial journalists’ social networks. We find that corporate events reported by connected journalists—such as those sharing a working relationship or common schooling institutions with the respective company management—are associated with markedly more favorable coverage. Positive media slant in these articles significantly increases stock market responses and distorts longer-term capital allocation, suggesting real effects of journalist connections in the financial markets.
Conferences: EFA 2020, EFA Doctoral Tutorial 2018, FIRS, Helsinki Finance Summit, Paris December Meeting, SFS Cavalcade North America
Industry-peers’ earnings surprises announced just hours before the M&A announcements correlate with the acquirers’ M&A announcement return. Consistent with behavioral biases, a week after the M&A announcement, acquirers’ response to the earnings surprises disappears. While the acquirers’ stock misvaluation is transitory, other effects are not. We show that larger earnings surprises are related to increased bid competition, to higher premium revisions, and to more withdrawn M&As. These results indicate that trend-seeking and extrapolation could create material distortions in some M&A transactions.
Conferences: AFA, Research in Behavioral Finance Conference
How Do Tax Increases Affect Investment Allocation within Multinationals?
with Antonio De Vito and Martin Jacob
Media coverage: LSE Business Review
This paper studies how tax increases transmit across countries through multinationals’ internal networks of subsidiaries. Using a large subsidiary-level dataset of European firms and several exogenous tax hikes, we find that local business units cut capital investment in response to foreign tax increases. We document two channels that propagate these shocks through firms’ internal networks: production linkages among subsidiaries and financial constraints. In the aggregate, domestic investment and employment decline with higher exposure to foreign tax increases.
Conferences: Berlin-Vallendar Tax Conference, European Central Bank
Using exogenous implementations of anti-bribery laws cross 41 countries, I find that criminalizing acquirers for foreign bribery reduces aggregate cross-border M&A activities by approximately 30%, acquirers’ gains by over half, and bid premium by 10%. These effects are stronger for public transactions and for targets located in countries (industries) with a higher level of corruption. The findings support the efficient side-payment model, which predicts a positive relation between bribery and cross-border transaction value.
Investment under Uncertainty: Do Firm Boundaries Matter?
with Jingyuan Mo
We examine how firms’ vertical structure affects investment under output price uncertainty. Exploiting a unique industrial organization in the oil exploration and production industry, where certain producers vertically integrate into downstream segments, we find that these integrated producers cut investments significantly more than do standalone producers under exogenous oil price uncertainty shocks. This finding is consistent with a real option model of investment, where a higher level of capital irreversibility amplifies the uncertainty effects on actual investment.