CEF.UP – FIN Webinar

Wednesday – June  2^nd, 2021, at 1:00 p.m.

Glass Half Full or Half Empty?  Activists, Short Sellers, and Disagreement

Pedro Saffi – Cambridge Judge Business School (joint work with Tao Li and Daheng Yang)

Abstract: We study events in which activist hedge funds and short sellers target the same stock, using European data on activism and mandatory disclosures of large short positions. The likelihood of activist targeting and the probability of a successful campaign are higher in the presence of large short sellers, with an even larger effect when investor disagreement is high. Hedge fund activism is associated with a reduction in short interest, but it does not affect the likelihood of a large short position. Finally, we show that hedge fund activism generates higher abnormal returns when large short sellers are present, especially when activists achieve their stated goals.

CEF.UP – FIN Webinar

Wednesday – May 19^th, 2021 at 3:00 p. m.

“Specialized Investments and Firms’ Boundaries: Evidence from Textual Analysis of Patents”

Michael Weisbach – Fisher College of Business (Ohio State University) – joint work with Jan Bena, Isil Erel and Daisy Wang

Abstract

Inducing firms to make specialized investments through bilateral contracts can be challenging because of potential hold-up problems. Such contracting difficulties have long been argued to be an important reason for acquisitions. To evaluate the extent to which this motivation leads to mergers, we perform a textual analysis of the patents filed by the same lead inventors of the target firms before and after the mergers. We find that patents of inventors from target firms become 15% to 20% more similar to those of acquirers’ inventors following completed mergers, benchmarked against patents filed by targets and a group of counterfactual acquirers. This pattern is stronger for vertical mergers that are likely to require specialized investments. There is no change in the similarity of patents for mergers that are announced but not consummated. Overall, we provide evidence suggesting that contracting issues in motivating specialized investment can be a motive for acquisitions.