Search Results
Working Paper
Reputation and Investor Activism: A Structural Approach
Swem, Nathan; Johnson, Travis L.
(2020-10-15)
We measure the impact of reputation for proxy fighting on investor activism by estimating a dynamic model in which activists engage a sequence of target firms. Our estimation produces an evolving reputation measure for each activist and quantifies its impact on campaign frequency and outcomes. We find that high reputation activists initiate 3.5 times as many campaigns and extract 85% more settlements from targets, and that reputation-building incentives explain 20% of campaign initiations and 19% of proxy fights. Our estimates indicate these reputation effects combine to nearly double the ...
Finance and Economics Discussion Series
, Paper 2017-036r1
Working Paper
A Critical Review of the Common Ownership Literature
Gerardi, Kristopher; Lowry, Michelle; Schenone, Carola
(2023-11-08)
The rapid growth in index funds and significant consolidation in the asset-management industry over the past few decades has led to higher levels of common ownership and increased attention on the topic by academic researchers. A consensus has yet to emerge from the literature regarding the consequences of increased common ownership on firm behavior and market outcomes. Given the potential implications for firms and investors alike, it is perhaps not surprising that policymakers, legal scholars, finance and accounting academics, and practitioners have all taken a keen interest in the subject. ...
FRB Atlanta Working Paper
, Paper 2023-17
Report
Merger options and risk arbitrage
Van Tassel, Peter
(2016-01-01)
Option prices embed predictive content for the outcomes of pending mergers and acquisitions. This is particularly important in merger arbitrage, where deal failure is a key risk. In this paper, I propose a dynamic asset pricing model that exploits the joint information in target stock and option prices to forecast deal outcomes. By analyzing how deal announcements affect the level and higher moments of target stock prices, the model yields better forecasts than existing methods. In addition, the model accurately predicts that merger arbitrage exhibits low volatility and a large Sharpe ratio ...
Staff Reports
, Paper 761
Working Paper
Pre-LBO Credit Market Conditions and Post-LBO Target Behavior
Kwak, Seung; Press, Charles
(2023-12-01)
In the context of leveraged buyouts (LBOs), this paper empirically studies the relation between pre-buyout credit market conditions and the post-buyout behavior of target companies, employing a supervisory dataset to overcome limited data availability for post-buyout target financial information. We propose an LBO-specific measure of (changes of) credit market conditions---the short-term (6-month) change of credit spreads leading up to buyout close. Using this proposed measure, we show that loosening pre-LBO credit market conditions, which are related to higher buyout leverage consistent with ...
Finance and Economics Discussion Series
, Paper 2023-077
Working Paper
Bank Size and Household Financial Sentiment: Surprising Evidence from the University of Michigan Surveys of Consumers
Roman, Raluca; Irresberger, Felix; Berger, Allen N.
(2019-01-14)
We analyze comparative advantages/disadvantages of small and large banks in improving household sentiment regarding financial conditions. We match sentiment data from the University Of Michigan Surveys Of Consumers with local banking market data from 2000 to 2014. Surprisingly, the evidence suggests that large rather than small banks have significant comparative advantages in boosting household sentiment. Findings are robust to instrumental variables and other econometric methods. Additional analyses are consistent with both scale economies and the superior safety of large banks as channels ...
Working Papers
, Paper 19-4
Working Paper
EBITDA Add-backs in Debt Contracting: A Step Too Far?
Faria-e-Castro, Miguel; Gopalan, Radhakrishnan; Pal, Avantika; Sanchez, Juan M.; Yerramilli, Vijay
(2022-09-22)
Financial covenants in syndicated loan agreements often rely on definitions of EBITDA that deviate from the GAAP definition. We document the increased usage of non-GAAP addbacks toEBITDA in recent times. Using the 2013 Interagency Guidance on Leveraged Lending, which we argue led to an exogenous increase in non-GAAP EBITDA addbacks, we show that these addbacksincrease the likelihood of loan delinquency and default, and also increase the likelihood of the borrower experiencing a ratings downgrade. Greater use of non-GAAP EBITDA addbacks also makes it more likely that lead arrangers lower their ...
Working Papers
, Paper 2022-029
Working Paper
The Impact of Stricter Merger Control on Bank Mergers and Acquisitions. Too-Big-To-Fail and Competition
Spagnolo, Giancarlo; Ongena, Steven; Carletti, Elena; Siedlarek, Jan-Peter
(2019-07-05)
The effect of regulations on the banking sector is a key question for financial intermediation. This paper provides evidence that merger control regulation, although not directly targeted at the banking sector, has substantial economic effects on bank mergers. Based on an extensive sample of European countries, we show that target announcement premia increased by up to 16 percentage points for mergers involving control shifts after changes in merger legislation, consistent with a market expectation of increased profitability. These effects go hand-in-hand with a reduction in the propensity ...
Working Papers
, Paper 16-14R2
Report
How do stock repurchases affect bank holding company performance?
Hirtle, Beverly
(2001-04-01)
Using data from bank holding company regulatory reports, we examine the relationship between stock repurchases and financial performance for a large sample of bank holding companies over the years 1987 to 1998. The primary result is that higher levels of repurchases in one year are associated with higher profitability and a lower share of problem loans in the subsequent year. This finding is robust to several different ways of measuring share repurchase activity. Our results appear to be driven primarily by bank holding companies with publicly traded stock, especially those companies whose ...
Staff Reports
, Paper 123
Working Paper
Assessing the Common Ownership Hypothesis in the US Banking Industry
Grundl, Serafin J.; Gramlich, Jacob P.
(2024-07-12)
The common ownership hypothesis (COH) states that firms with common shareholders, primarily large asset managers, compete less aggressively with each other. The U.S. banking industry is well suited to assess the common ownership hypothesis, because thousands of private banks without common ownership (CO) compete with hundreds of public banks with high and increasing levels of CO. This paper assesses the COH in the banking industry using more comprehensive ownership data than previous studies. In simple comparisons of raw deposit rate averages we document that the deposit rates of public banks ...
Finance and Economics Discussion Series
, Paper 2024-022r1
Working Paper
Interlocked Executives and Insider Board Members: An Empirical Analysis
Gayle, George-Levi; Miller, Robert A.; Golan, Limor
(2015-11-27)
This paper asked the question of whether the behavior and compensation of interlocked executives and non-independent board of directors are consistent with the hypothesis of governance problem or whether this problem is mitigated by implicit and market incentives. It then analyzes the role of independent board of directors. Empirically, we cannot reject the hypothesis that executives in companies with a large number of non-independent directors on the board receive the same expected compensation as other executives. In our model, every executive has an incentive to work. Placing more of ...
Working Papers
, Paper 2015-40
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Common ownership 8 items
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