Corporate Finance, Entrepreneurial Finance, Private Equity, M&A, Labor and Finance, Innovation and Strategy
“Utilizing Management Technology Advantages in Cross-Border Acquisitions” (Job Market Paper)
A growing literature documents that management quality accounts for an important portion of the differences in productivity across firms and countries. One route through which management practices could affect productivity is through mergers and acquisitions. In this paper, I investigate the role of management quality on cross-border acquisition activities and outcomes. I find that cross-border deal volume is positively associated with management quality differences across countries and firms. Firms with better management practices are more likely to be the acquirers. Acquisition premia paid to the target are positively related to the difference in management quality between the acquirer and target firms. Managers of the target firm are more likely to quit when the acquiring firm has better management practices. Lastly, target firms are less likely to be divested post-acquisition when acquirer firms have better management practices. My results indicate that management as a strategic intangible asset plays an important role in the cross-border acquisition plans, activities and outcomes.
“Transition from Public to Private Ownership and the Decision to Innovate” (with Ali Mohammadi)
The number of publicly listed firms in the USA has been declining since 1996 and it was close to 3,700 in 2015 which is about 50% less than its peak 7,322 in 1996. Given the critical role of innovation for economic growth and job creation, it is important to know how innovation is affected after going private. Recent literature documents that firms experience a drop in the quality of innovation output following going public. However, considering most firms that go private are more mature and bigger than the firms that go public, the findings of the recent literature on going public firms may not be enough to explain the changes in the innovation policies of going private firms. Therefore the question “How is transition from public to private ownership related to the decision to innovate?” stays unanswered. In this paper, we investigate this question by using a novel dataset of successful and withdrawn going private transactions. By careful examination of each transaction, we isolate the withdrawn going private transactions that failed due to exogenous reasons, and use them as our control sample in our analysis. We find that innovation output of the going private firms measured using patent based metrics increases significantly post transaction. Furthermore, the quality of the innovation output proxied by the number of average scaled citations and the number of scaled citations of the best patent of a firm increases significantly after going private. These results provide support for the line of theory predicting that going private transactions can decrease agency problems and going private firms with concentrated ownership and debt can be expected to invest more carefully and efficiently in innovation.
Work in Progress
- “Organizational Restructuring of the Buyout Targets” (with Per Strömberg)
- “Private Equity, Productivity, and Industry Structure” (with Per Strömberg)