I am a 4th-year Ph.D. Candidate in Finance at WHU – Otto Beisheim School of Management and a visiting scholar at Stern School of Business, at NYU. I will be on the job market in 2018/2019. You can download here a preliminary version of my Job Market Paper.
Chair of Corporate Finance
WHU – Otto Beisheim School of Management
Burgplatz 2, 56179 Vallendar
“She Is Mine”: Determinants and Value Effects of Early Announcements in Takeovers
with NIHAT AKTAS and BURCIN YURTOGLU
Journal of Corporate Finance, 2018, 50: 180-202
Best AFFI 2017 Conference Paper; Media coverage: Les Echos
About 7% of M&A bids are voluntarily disclosed by the bidders prior to the signature of a definitive agreement. Why is this happening? We propose an “announce-to-signal” explanation to these early announcements: they allow bidders to signal to target shareholders high synergies so as to overcome negotiation frictions and improve success rates. Consistent with signaling, we show that negotiation frictions predict earlier announcements. Early announced transactions are associated with higher expected synergies, offer premium, completion rates, and public competition. Moreover, bidder announcement returns do not suggest overpayment and the existence of agency issues in these transactions.
Friends at WSJ: Journalist Connection, News Tone, and Stock Returns
Job Market Paper (preliminary version)
This paper studies the effect of the firm–journalist network on news tone and stock returns. Using a proprietary dataset on the firm’s and the CEO’s connections to the Wall Street Journal (WSJ) reporters, I find that such connections lead to markedly more favorable coverage of corporate M&A news and to better associated market reactions. The effect on the financial market is larger for the deals featured on the front page of the Journal. Evidence suggests that the relationship is causal: First, using the reporters’ turnover as an instrument for the connected coverage, I observe that the news slant and market effects remain significant. Additionally, using Rupert Murdoch’s acquisition of the WSJ as an exogenous shock to journalistic independence, I find that firms previously connected to Mr. Murdoch received better coverage and more positive stock returns after the ownership change.
Are Market Reactions to M&As Biased by Overextrapolation of Salient News?
with ELIEZER FICH from Drexel University
We study earnings surprises released by firms in a takeover target’s 1-digit SIC hours before the M&A public announcement. We find that these surprises correlate with the acquirers’ M&A announcement return, but not with the returns to 4-digit SIC matched bidder and target peer firms. A week after the M&A announcement, acquirers exhibit a stock price reversal and their response to the earnings surprises disappears. We cannot reconcile these findings with rational Bayesian updating, information transmission, or strategic timing theories. The evidence that salient events affect investors’ M&A valuations, supports behavioral theories predicting asset pricing distortions due to cognitive biases.
Do acquirers bribe in cross-border M&A transactions? I explore an exogenous implementation of the OECD Anti-bribery Convention in 41 countries that criminalizes bribe payment in foreign markets. I document that cross-border deal frequency drops significantly from affected countries after the law enactment, and that more corrupt target countries experience a greater deal number decline. These results suggest a hidden use of bribes in cross-border transactions. Further evidence suggests that deal synergy drops due to the prohibition against foreign bribery: deal premium decreases significantly following the laws, and deal abnormal returns drop as the corruption and governance environment in the target country worsens relative to the acquirer country.
What Drives the Takeover Process? New Evidence from the Inner Workings of Internal M&A Teams
with NIHAT AKTAS, AUDRA BOONE, ALEXANDER WITKOWSKI and BURCIN YURTOGLU from WHU and Texas Christian University
This paper provides insights into the inner workings of internal corporate merger and acquisition teams using extensive survey evidence from 65 firms from Austria, Germany, and Switzerland. The responses indicate the growing importance in relying on the firm’s own employees for analyzing potential deals and implementing the takeover strategies. Responding firms analyze a significant number of potential deals each year and cite economic rationales such as synergies more often than market power or undervaluation as motives for acquiring a particular target firm. Internal teams primarily use DCF and multiples to value firms. CEOs and CFOs are more likely to participate in negotiations if the deal is large than smaller deals, which are handled by specialized M&A teams or business units. Firms evaluate merger success based on achieving particular goals or CEO satisfaction. These results shed light on the why firm-specific factors account for a large portion of the variation in takeover outcomes.
Irreversible Investment under Uncertainty: Do Firm Boundaries Matter?
with JOHNSON MO from NYU Stern
We empirically analyze investment under output price uncertainty when firms face differential asset specificity or irreversibility. We study the oil exploration and production (E&P) industry, where some producers vertically integrate into downstream segments and face higher capital irreversibility. Using exogenous oil price uncertainty shocks, we show that these integrated producers cut capital expenditures significantly more than standalone producers in response to price volatility. This finding is consistent with a real option model of investment, where a higher level of capital irreversibility amplifies the uncertainty effects on real investment. We show that our results cannot be explained by intersegment investment transfer.