Collateral Requirements and Corporate Policy Decisions (joint with Kizkitza Biguri (Oslo Business School - OsloMet)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3375634
We challenge the theorized trade-off between risk management and investment due to collateral constraints. We compile a unique dataset of derivative transactions and collateral for U.S. public firms. Exploiting exogenous variation in cash-collateral, we observe significant effects on hedging but no impact on investment. Variations in PPE-collateral, instead, impact investment but show no association with hedging. Our findings suggest that a firm’s assets should not be seen as interchangeable; they rather play distinct roles in the collateralization process.
Accepted at the Journal of Financial Intermediation.
Who pays a visit to Brussels? Firm value effects of cross-border political access to European Commissioners (joint with Kizkitza Biguri (Oslo Business School - OsloMet))
We analyze meetings of firms with policymakers at the European Commission (EC). Meetings with Commissioners are associated with positive abnormal equity returns for US firms. Firms of the European Union (EU), however, do not experience significant value increases. We identify regulatory outcomes as a channel that can rationalize this difference in value effects of political access. US firms with meetings are more likely to receive favorable decisions in their EC merger decisions than their EU peers. The results suggest that cross-border political access can alleviate uncertainties and alleged discriminatory behavior of regulators in foreign markets.
Accepted at the Journal of Financial and Quantitative Analysis. https://doi.org/10.1017/S0022109024000012
Precious Neighbors: The Value of Co-locating with the Government
papers.ssrn.com/sol3/papers.cfm?abstract_id=3801772
In many countries, disproportionately many firms locate their headquarters in the capital city. Spatial proximity to a country’s leading politicians may be beneficial for a number of reasons. Since neither firms nor governments move randomly, the effects of firms' co-locating with the government are normally hard to identify. I solve this problem by examining a unique event - the decision to relocate the German federal government from Bonn to Berlin in 1991. Following reunification, there was a free vote in the German parliament on the future location of the government. Berlin won by a narrow margin, an event that could not be anticipated even days before and that is free from confounding factors. Firms with corporate headquarters in Berlin experience abnormal equity returns of more than 3 percent following the relocation decision.
Review of Finance, 27 (4), (2023), 1269-1296.
Changes in the Electorate and Firm Values: Evidence from the Introduction of Female Suffrage in Switzerland
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3316987
This paper analyzes the effect of the composition of the electorate on corporate prospects. Electorates constantly change, and support-maximizing policymakers adjust their legislative behavior to accommodate shifts in voter preferences. If the policy adjustments affect individual firms or entire industries, anticipating the effects is crucial for corporate decision-makers. In this paper, I analyze a large-scale shock to the composition of the electorate - the introduction of female suffrage in Switzerland in 1971. Using a hand-collected dataset on Swiss firm level data and security prices, I show that investor responses and firm profitability are sensitive to expected changes in government policies that reflect female voters' preferences. The results emphasize that considering the evolution of the electorate and its impact on policymaking should be an integral part of corporate strategies.
Journal of Empirical Finance, 70, (2023), 386-402.
The value of international political connections: Evidence from Trump's 2016 surprise election (joint with Alexander Fink (University of Leipzig))
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3305291
We investigate the value of international political connections by exploiting the 2016 sur- prise election of Donald Trump as U.S. president. To identify political connections, we com- pile a dataset of campaign contributions of U.S. subsidiaries of multinational companies headquartered outside of the U.S. We match these firms with comparable foreign firms that did not make any U.S. campaign contributions. We find that following the 2016 elec- tions the abnormal equity returns for foreign firms that contributed considerably more to Republicans than to Democrats were about 2 percentage points higher than for their non-contributing peers. The results suggest that cross-border political connections can be valuable firm assets.
Journal of Economic Behavior & Organization, 176, (2020), 691-700.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3662441
This paper investigates the implications of the fair value protections contemplated by the standard corporate contract (i.e., the standard contract form for which corporate law provides) for the entrepreneur–venture capitalist relationship, focusing, in particular, on unavoidable value-destroying trade sales. First, it demonstrates that the typical entrepreneur–venture capitalist contract does institutionalize the venture capitalist’s liquidity needs, allowing, under some circumstances, for counterintuitive instances of contractually-compliant value destruction. Unavoidable value-destroying trade sales are the most tangible example. Next, it argues that fair value protections can prevent the entrepreneur and venture capitalist from allocating the value that these transactions generate as they would want. Then, it shows that the reality of venture capital-backed firms calls for a process of adaptation of the standard corporate contract that has one major step in the deactivation or re-shaping of fair value protections. Finally, it argues that a standard corporate contract aiming to promote social welfare through venture capital should feature flexible fair value protections.
European Business Organization Law Review, 22, (2021), 39-86.