Research
Publications
The Effects of Foreign Acquisitions on the Value of Industry Peers, Journal of Financial and Quantitative Analysis, Forthcoming.
Abstract This paper studies how industry peers’ stock prices respond when another firm in the industry is acquired by a foreign firm. The average stock price reactions of industry peers in horizontal foreign acquisitions around deal announcements are significantly negative. Peers’ returns are more negative in growing, less specialized, and competitive industries. Moreover, the negative stock price reactions of industry peers are related to future decreases in their operating performance. Overall, these results suggest that foreign acquisitions have strong competitive effects for the industry peers of U.S. target companies.
Foreign Acquisition and Credit Risk: Evidence from the U.S. CDS Market, Journal of Financial and Quantitative Analysis, 2022.
Abstract This paper empirically analyzes the effect of foreign block acquisitions on U.S. target firms' credit risk as measured by their credit default swap (CDS) spreads. Foreign block purchases lead to a greater increase in the target firms' CDS premia post-acquisition compared to domestic block purchases. This effect is stronger when foreign owners are geographically and culturally more distant, and when they obtain majority control. The findings are consistent with an asymmetric information hypothesis, in which foreign owners are less effective monitors due to information barriers.
Working papers
Presented at: Georgetown University (Brown Bag Seminar, 2023), Edinburgh Corporate Finance Conference (2023), 4th Annual Boca Corporate Finance and Governance (Scheduled)
Media: Harvard Law School Forum on Corporate Governance, Fortune
Abstract We analyze voting records for management proposals and find that investors today hold directors accountable for a much wider range of issues, such as climate change and board diversity, than in the past. Within environment, climate change is the only subcategory that is significantly associated with voting outcome. Governance is an important driver of voting outcome, however, the newer and broader proxy for governance that we use has little in common with traditional measures used in the literature. Within governance, board diversity is significantly related to voting outcome. However, we find that social issues are not relevant for voting outcomes. Institutional investors have started providing rationale for why they voted against a particular director. The existence of such rationale related to board diversity, busyness, tenure, and independence result in more dissent votes. Female directors receive fewer dissent votes but not so if they are long-tenured. The mere presence of a shareholder proposal is associated with lower support for directors. This effect is driven by governance and not socially responsible proposals.
Why Do Firms Borrow from Foreign Banks?
Presented at: The Ohio State University (Brown Bag Seminar, 2019), Basel Workshop on Credit Risk (2019), SFI Job Market Workshop (2019), USI Lugano (Brown Bag Seminar, 2019)
Abstract This paper examines U.S. firms' motives for participating in cross-border syndicated loans from foreign banks. Firms that borrow from foreign lead arrangers pay higher loan spreads than those that borrow from domestic lenders, controlling for firm and loan characteristics and using matched sample analysis. These firms experience an increase in their foreign income and international M&A activities post-borrowing, which suggests that the global expansion of operations is an important reason a firm borrows overseas. Moreover, loan spreads increase with the geographic and cultural distance between borrowers and foreign lenders, consistent with the higher costs of information acquisition and monitoring.
Does Corporate Governance Matter? Evidence from the AGR Governance Rating (with Alberto Plazzi and Walter N. Torous)
Presented at: 2019 Third Israel Behavioral Finance Conference
Abstract Poor corporate governance permits unreliable financial reporting by a firm's management. The AGR governance rating is based on the premise that a more accurate assessment of the effects of corporate governance can be formulated by taking this output of corporate governance into account in addition to traditional governance inputs such as board structure. We document that the time series variation in a firm's AGR score reliably forecasts the firm's Return on Assets (ROA) and other measures of firm performance. A portfolio going long shares of better governed firms with high AGR scores and shorting shares of poorly governed firms with low AGR scores generates a risk-adjusted return of approximately 5% per year. Most of this return differential originates with firms having poor corporate governance. Overall, our results are consistent with a causal link between corporate governance and future firm and stock price performance.
Works in progress
The Real Effects of Foreign Takeovers: Productivity, Risk, and Product Market Competition (with Reena Aggarwal and Sandeep Dahiya)
Shareholder Voting and Corporate ESG Profiles Around the World (with Reena Aggarwal and Sandeep Dahiya)
Intra-Industry Wealth Effects of Cross-Border Acquisitions: International Evidence
Book chapter