5-7 Aug 2026: I organize a PhD course "The social value of financial-market information" in Aarhus, taught by Philip Bond.
Co-Authored with Christian Hilpert, Jan Pape, and Alexander Szimayer
July 10, 2026 - Available at SSRN
Abstract:
We analyze a dynamic credit rating game with feedback effects in which the rating agency assesses a firm under model uncertainty. The agency holds multiple priors over the firm's measurement error, interpreted as heterogeneous analyst-team views of the firm's intangible assets, and its rating feeds back into the firm's financing cost and default decision. Relative to a single-prior benchmark, the ambiguity-averse agency places strictly more than half the weight on the less informative of two selected priors. When priors share a common direction, jointly pessimistic (optimistic) priors lead the firm to delay (accelerate) default, and credit spreads inherit the pattern.
Co-Authored with Negar Ghanbari and Anil Kumar
July 8, 2026 - Available at SSRN
Abstract:
How does financial flexibility shape a firm's debt maturity structure? We show, both theoretically and empirically, that greater flexibility leads firms to concentrate their maturities, raising their exposure to refinancing risk. In our model, the firm chooses its maturity structure to trade off rollover risk and issuance costs, while we allow investment to scale with borrowing capacity. As asset values rise and investment nears first best, the rollover-risk benefit of dispersion shrinks relative to its issuance-cost savings, and the firm concentrates maturities. We identify this effect using local real estate price changes as plausibly exogenous shocks to the borrowing capacity of firms that own real estate. In nearly three decades of U.S. data, higher real estate values raise debt maturity concentration; the effect is stronger for corporate bonds than for bank loans, for unsecured than for secured debt, for financially constrained firms, and for firms with weaker growth options, and it carries over to newly issued debt. Concentration has a flip side: firms entering the 2008--09 crisis with more concentrated maturities were markedly more fragile. Financial flexibility, by encouraging maturity clustering in good times, can thus become a hidden source of crisis-time fragility.
Co-Authored with Narmin Nahidi
April 14, 2026 - Available at SSRN
Abstract:
This paper studies whether abnormal target-side media exposure is associated with takeover pricing, payment method, and completion dynamics in U.S. public-to-public acquisitions. We construct a residualized measure of abnormal pre-announcement coverage that captures deviations from predictable deal prominence using a Poisson model. In 4,352 transactions from 1997 to 2024, aggregate abnormal exposure is associated with lower negotiated premiums, while its adverse component is associated with higher premiums across measurement windows, indicating asymmetric salience in takeover bargaining. Abnormal exposure is also associated with a higher likelihood of cash financing and, under negative polarity, with faster early-stage completion. These patterns remain after conditioning on announcement-period abnormal returns. Our evidence is more consistent with bargaining pressure under adverse salience than with a purely short-horizon market-reaction channel, suggesting that target-side visibility is a systematic correlate of takeover deal design.
Co-Authored with Sai Palepu
January 15, 2025 - Available at SSRN
Abstract:
We study the role of Environmental, Social, and Governance (ESG) alignment in shaping customer-supplier relationships within U.S. supply chains. Using data from the FactSet Revere supply chain database and Refinitiv ESG scores (2003–2019), we find that major customers significantly influence supplier ESG performance, with a 6.9% increase linked to one unit increase in the major customer ESG scores. Positive ESG divergence, where a supplier outperforms its major customer, increases the likelihood of relationship termination by 18.1%, underscoring the importance of ESG alignment. Replacement suppliers generally exhibit higher ESG ratings than their predecessors, suggesting a preference for sustainability when reconfiguring supply chains.
Co-Authored with Narmin Nahidi and Arman Eshraghi
January 6, 2025 - Available at SSRN
Abstract:
This study explores the role of Digital Rights Management (DRM) systems in mergers and acquisitions (M&A), focusing on their impact during due diligence. While DRM is widely recognized for intellectual property protection, its influence on governance and information asymmetry in M&A transactions has been underexplored. Using agency theory, we examine DRM’s role in reducing risks of information leakage and enhancing decision-making. Our findings show that DRM positively influences financial and legal due diligence, enhancing performance indicators such as return on assets and the thoroughness of legal assessments. However, DRM also negatively impacts business and high-tech performance, especially in patent M&A, by limiting technological flexibility and innovation. This suggests that while DRM strengthens data security, it may hinder the use of patented technologies, particularly in patent-related M&A transactions. These insights underscore DRM’s dual role in enhancing security and governance while posing challenges for technological flexibility, with important implications for M&A practitioners and policymakers.
Co-Authored with Itay Goldstein and Matthias Lassak
August 27, 2024 - Available at SSRN
Abstract:
We provide an equilibrium analysis investigating efficiency differences between private and public firms’ information generation strategies, emphasizing public firms’ unique ability to learn additional information from financial markets through the feedback effect. The public firm features two mutually reinforcing sources of inefficiency. First, the public firm relies too much on market prices, as it does not incorporate information acquisition costs borne by market participants. Second, investors’ incentives to acquire information are too strong, as they maximize private trading profits as opposed to real efficiency. As the private firm does not face these distorted information acquisition incentives in our model, it is associated with higher real efficiency.
Co-Authored with Christian Hilpert and Alexander Szimayer
November 22, 2022 - Available at SSRN
Abstract:
How does a creditor’s learning from a firm’s strategic actions affect bankruptcy prediction, debt values, and optimal capital structure? We investigate a Leland (1994) setting augmented by asymmetric information on the firm’s asset value. Observing the firm’s survival of apparently distressed periods, the creditor excludes asset value estimates that are too low to be consistent with the observed survival. We show that the expected bankruptcy threshold decreases as result of the learning. While expected asset and debt values decrease upon reaching new all-time-low asset values, they are persistently higher once the observed asset value recovers to a given level, but the creditor remembers the all-time low. In terms of selecting the capital structure, high quality firms can separate and signal their quality by over-leveraging if the information asymmetry is high enough. Moderate information asymmetry implies a pooling equilibrium.
Co-Authored with Christian Hilpert, Jan Pape, and Alexander Szimayer
Co-Authored with Zifeng Feng and Anil Kumar
Co-Authored with Fynn Sowinski