Publication
“Internalizing Peer Firm Product Market Concerns: Supply Chain Relations and M&A Activity” (with Jinhwan Kim, Sugata Roychowdhury , and Benjamin Yost)
Journal of Accounting Research
Abstract: We explore whether firms internalize the product market concerns of their economically linked peers by examining M&A decisions in the context of customer-supplier relations. Given the extensive transfer of capital, knowledge, and information between merging parties, we hypothesize that customers' competition concerns discourage their suppliers from engaging in vertically conflicted transactions (i.e., acquisitions of their customers' rivals or suppliers to those rivals). Consistent with our hypothesis, we find that suppliers are less likely to engage in such transactions when their customers are subject to higher product market competition. Moreover, the effect is more pronounced when suppliers and customers have greater relationship-specific investments and when customers face heightened proprietary information concerns. Using plausibly exogenous variation in common ownership between customers and their rivals as a shock to customers' competition concerns, we conclude that the link between customers' competition concerns and supplier acquisitions is likely causal. Our findings suggest that firms alter their investment and strategic decisions in response to the product market competition concerns of their economically-related peers.
Working Papers
Job Market Paper: “Learning from Peers’ Private Information: Evidence from Failed M&A”
Dissertation committee members: Professors Amy Hutton (Chair), Sugata Roychowdhury, and Susan Shu
Presented at Boston College; 2022 Boston Empirical Accounting Conference; California State University Fullerton; University of British Columbia.
Abstract: I investigate the effects of private information acquisition from M&A due diligence on bidders’ subsequent actions. Using a sample of negotiated and announced M&A deals that fail to close, I find that, following the failed transactions, bidders achieve higher investment efficiency and higher innovation outputs. They also expand into new product markets. Cross-sectional cuts demonstrate that the effects are more pronounced when a bidder has greater opportunities to learn from the target firms’ proprietary information. While bidders benefit through M&A negotiations, target firms bear costs from sharing proprietary information, as shown by a modest decline in their innovation outcomes. Overall, my study contributes to the understanding of the real effects of learning from peers’ proprietary information.
“The Effect of Analyst Research on Managers’ Merger and Acquisition Decisions: Revising Shareholder Opinions” (with Jared Flake and Jalal Sani)
Under Review at Journal of Accounting Research
Presented at the 5th Analyst Research Conference, London; BYU conference.
Abstract: Completing an acquisition with negative announcement returns can have adverse consequences for managers (e.g., forced turnover). Yet, managers complete 91% of such deals. Prior research interprets these deals as evidence of agency motives. We propose a complementary explanation and examine the role of analyst research. We posit that, because of the costs of acquiring and processing information, shareholders may not possess all relevant information at the deal announcement date and subsequently revise their opinions. These revised opinions affect managers’ perceptions of the costs of deviating from shareholders’ initial opinions and their decision to complete the deal. While the effect of analyst research on the likelihood of deal completion is ex-ante unclear, our results suggest that analyst research prompts acquirers’ shareholders to revise their opinions upward, increasing the likelihood of deal completion. This effect is stronger when (i) shareholders are less informed, (ii) the deal quality is relatively high, (iii) analysts are more informed, (iv) agency motivation for completing a deal is lower, and (v) analysts are not affiliated with the acquirer. Overall, our findings highlight the role of analyst research in motivating investors to revise their opinions, thereby influencing corporate investment decisions.
“Whatever It Takes: Evidence on the Trade-Off between Employee Safety Violations and Product Recalls” (with Megan Grady)
Review and Resubmit at Advances in Accounting.
Abstract: We study the interplay between two critical types of safety violations within organizations: workplace safety and product safety violations. Our results show that firms make a trade-off between these negative behaviors, opting for higher product safety levels at the expense of employee safety. This effect is further exacerbated when they face additional market pressures, whether in the form of earnings targets or limited resources. We also find evidence that cost-cutting behaviors relating to workplace safety are associated with a decrease in product recall incidents. This suggests that managers prioritize the interests of external stakeholders (i.e., customers) over those of their internal stakeholders (i.e., employees). Finally, we examine the implications that this trade-off behavior has on overall firm value, as well as the real consequences this trade-off has in terms of human life.
"Laying Low: Peer Firms’ Strategic Nondisclosure During Merger Antitrust Review" (with Natalie Berfeld, Mark Piorkowski, Lauren Vollon, and Ben Yost)
Presented at 20th London Business School Accounting Symposium; Southern California Accounting Research Forum; Indiana University; Boston College.
Abstract: We study whether and how firms strategically alter their disclosure choices to influence the regulatory outcomes of mergers involving their peers. Specifically, we consider antitrust reviews for horizontal (i.e., within-industry) mergers in which the FTC and DOJ assess whether the merger is likely to lead to anticompetitive outcomes. We hypothesize and find evidence that industry peers who stand to benefit from market consolidation refrain from issuing positive news press releases during the antitrust review period in order to avoid providing the regulators with evidence that could be used to block the merger. Cross-sectionally, the results are driven by mergers in industries with greater product similarity, higher concentration, and when the peers and merging firms share greater common ownership. Moreover, we find that peers’ strategic nondisclosure is associated with a faster termination of the review and increased profitability among peers following the merger. In a falsification test, we find no evidence of strategic peer disclosure in mergers where industry peers are unlikely to benefit (i.e., vertical mergers). Our findings highlight the role of peer firm disclosures in shaping the information environment relevant to regulatory outcomes.
“The Effect of Private Country-by-Country Reporting on Mergers and Acquisitions” (with Novia X. Chen, Sabrina Chi, and Anh Persson)
Presented at UIUC; SoCal Tax Reading Group; Scheduled to present at HARC 2025.
Abstract: We examine the impact of mandatory private country-by-country reporting (CbCR)—a widely adopted tax transparency initiative—on mergers and acquisitions. Using difference-in-differences and regression discontinuity designs, we document a decrease in premiums for affected targets in the post-CbCR adoption period relative to unaffected targets. The decrease in premiums is more pronounced for tax-aggressive targets, suggesting that acquirers factor in increased tax enforcement risk when pricing these targets. In addition, consistent with CbCR providing incremental information to acquirers and reducing information frictions during the negotiation and due diligence process, we find an increased likelihood of deal completion, a higher percentage of consideration paid in cash, shorter due diligence, and better post-acquisition performance for targets subject to CbCR. Our evidence highlights the dual role of CbCR in M&As by increasing tax enforcement risk and reducing information frictions, indicating a spillover effect of mandatory private tax disclosure on stakeholders other than tax authorities.