Empirical corporate finance
Corporate culture, shareholder activism, debt contracting, information environment.
Corporate Culture in M&As: Evidence from CEO Letters to Shareholders (Job market paper, SSRN Link)
This paper examines the role of corporate culture for mergers and acquisitions. To quantify corporate culture, I run a textual analysis of the language used in CEOs' annual letters. This analysis categorizes firms into three different corporate cultures: collaborative, innovative, and customer-centric. Using the novel measure of corporate culture, I find that firms with more similar corporate cultures are more likely to merge. Second, buyers' announcement returns are higher if targets have more similar corporate cultures. Finally, the cultural integration of two merged firms is positively related to post-merger performance and is negatively associated with ex post divestiture. In sum, this paper shows that cultural differences have meaningful impacts on mergers.
This paper examines managers' strategic use of financial disclosure in labor negotiations with unions. Using the exogenous expiration date of collective bargaining contracts, I find that when wage negotiations are imminent, firms strategically redact information about material agreements. Strategic redaction is pronounced when unions cannot accurately predict firms' prospects, when firms have low growth opportunities, when liquidity is less constrained, and when the estimated cost of a work stoppage is low. Analysis of wage settlement outcomes suggests that strategic disclosure enhances firms' bargaining power and suppresses unions' wage demand. However, strategic disclosure is statistically uncorrelated to ex post performance. These results imply that firms strategically withhold information to balance the costs and benefits of information asymmetry.
This paper proposes and tests how a credible threat from shareholder intervention in board composition influences the relationship between the firm and its various stakeholders. I hypothesize that shareholders’ quasi-rent seeking weakens the incumbent management’s commitment power and discourages stakeholders from investing in relationship-specific investment. To strengthen the commitment power to stakeholders, firms incorporate more explicit terms in their contracts. The theory also suggests that the strong commitment towards stakeholders benefits the existing board by functioning as a takeover defense device. The explicit pledge reduces shareholder gains from active involvement so deters takeover attempts.
Labor Unions and Debt Contract Design
Risk Factors in Mergers and Acquisitions, with Kenneth R. Ahern