CEF.UP – FIN Seminar/Webinar

Thursday – May 25^th, 2023 at 1:00 p.m. | Room 305| Online

“Private Equity Debt Funds: Who Wins and Who Loses?”

Florencio Lopez-de-Silanes  – SKEMA Business School – Université Côte d’Azur, and NBER (joint work with Axel Buchner and Armin Schwienbacher)

Abstract:

“We exploit a unique data set to provide the first analysis of the structure, performance and gain distribution of deals financed by the same private equity firm on the equity and debt sides (related deals). Most related deals are carried out by a few large and experienced PE firms. In support of the conflict of interest hypothesis, we document a transfer of value from debt to equity funds in related transactions relative to unrelated transactions. Yet, the overall value impact of related deals (debt and equity combined) is positive and limited partners of PE-affiliated debt funds do not loose overall. Related deals generate sizable gains for PE firms, most likely through the better ex-post incentives of these deals.”

CEF.UP – FIN Seminar/Webinar

Thursday – May 4^th, 2023 at 1:00 p.m. | Room 305| Online

“Macroeconomic Announcements and the News that Matters Most to Investors“

Rik Frehen  – Tilburg University (joint work with Samia Badidi and Martijn Boons)

Abstract:

“We study a large set of macroeconomic announcements (MAs), disentangle their news content, and estimate risk premia for each type of news in the cross-section of stocks. Our most interesting finding is that a portfolio that pays off around MAs that negatively impact the stock market commands a large and positive risk premium. Adding this portfolio to a position in the stock market substantially increases the Sharpe ratio, while reducing price impact exposure to MAs. We argue that this portfolio is risky, consistent with models of reinvestment risk. Our findings challenge equilibrium models predicting a negative relation between shocks to discount rates and marginal utility as well as stories of cash ow news arriving on MA days.”

CEF.UP – FIN Seminar/Webinar

Thursday – April 20^th, 2023 at 1:00 p.m. | Room 305| Online

“Political connections and shareholder support“

Anders Löflund  – Hanken School of Economics (joint work with Magnus Blomkvist, Eva Liljeblom and Etienne Redor)

Abstract:

“We study investors’ preferences for corporate political connections in the U.S. using a novel measure; shareholder votes given to individual directors. We find that, after fully accounting for all firm-year specific information and a wide range of director characteristics, that politically connected directors on average do not obtain significantly greater shareholder support. However, during the time-period 2010 to 2016 the board elections echo the nationwide political climate, as directors with ties to the Democratic party receive more shareholder votes. We also find that shareholders have a stronger preference for politically connected directors in heavily regulated industries, suggesting that board members closer to the incumbent government can alleviate regulatory risk. Our study has implications for director selection and the role of political connections in shaping corporate governance practices.”

CEF.UP – FIN Seminar/Webinar

Thursday – April 13^th, 2023 at 1:00 p.m. |Room 305| Online

“Sustainability or Performance: Ratings and Fund Managers’ Incentives”

 Nickolay Gantchev  – Warwick Business School  (joint work with Mariassunta Giannetti and Rachel Li)

Abstract:

“We explore how mutual fund managers and investors react when the tradeoff between a fund’s sustainability and performance becomes salient. Following the introduction of Morningstar’s sustainability ratings (the “globe” ratings), mutual funds increased their holdings of sustainable stocks to attract flows. Such sustainability-driven trades, however, underperformed, impairing the funds’ overall performance. Consequently, a tradeoff between sustainability and performance emerged. In the new equilibrium, the globe ratings do not affect investor flows and funds no longer trade to improve their globe ratings.”

CEF.UP – FIN Seminar/Webinar

Thursday – March 9^th, 2023 at 1:00 p.m. |Room 305| Online

“Corporate Taxation and Carbon Emissions“

Julien Sauvagnat – Bocconi University (joint work with Luigi Iovino and Thorsten Martin)

Abstract:

“We study the relationship between corporate taxation and carbon emissions in the U.S. We show that dirty firms pay lower profit taxes. This relationship is driven by dirty firms benefiting disproportionately more from the tax shield of debt due to their higher leverage. In addition, we document that the higher leverage of dirty firms is fully accounted for by the larger share of tangible assets owned by such firms. We build a general-equilibrium multi-sector economy and show that a revenue-neutral increase in profit taxation could lead to large decreases in aggregate carbon emissions without any noticeable change in GDP.”

CEF.UP – FIN Seminar/Webinar

Thursday – February 9^th, 2023 at 1:00 p.m. |Room 305| Online

“Incomplete supervisory cooperation“

Wolf Wagner – Rotterdam School of Management and CEPR (joint work with Thorsten Beck and Consuelo Silva-Buston)

Abstract:

“Banking supervisors frequently cooperate across countries, but cooperation only imperfectly covers the global operations of large banking groups. We show that this causes significant third-country externalities. Using hand-collected supervisory cooperation data, we document that banking groups shift lending activities and risk into third-country subsidiaries when cooperation agreements cover their operations in other countries. The implied country-level increase in the share of foreign loans is 16%. We also show that countries do not internalize third-country effects when making cooperation decisions, resulting in a 26 percentage point higher propensity to cooperate. Overall, our results highlight a need for “cooperating on cooperation.”

CEF.UP – FIN Seminar/Webinar

Thursday – November 17^th, 2022 at 1:00 p.m. |Room 305| Online

“Committing to Grow: Privatizations and Firm Dynamics in East Germany”

Nicolas Serrano-Velarde – Bocconi University (joint work U. Akcigit, H. Alp and A. Diegmann)

Abstract:

“We study the implications of employment targets on firm dynamics during the privatization of the East German economy. Exploiting novel contract-level data, we document three stylized facts. First, the policy distorted firm size choices and generated bunching of firms around their committed employment target. Second, exploiting heterogeneous labor preferences of privatizers, we show that assigning tight commitments to firms causes an increase in employment growth and leads to higher productivity growth. Finally, tighter commitments also result in significant costs by leading to increased firm exit. We interpret these results through the lens of a dynamic model with endogenous productivity growth at the firm level. The model highlights that while tight commitments distort the employment decision statically and lead to a higher exit probability, they also induce a “catch-up” increase in productivity growth. This is because although firm profits are lower under tight commitments, marginal profits with respect to productivity are higher. We calibrate the model to our data and find that the policy lead to a 3 percentage points higher aggregate TFP growth thanks to the productivity improvements of firms with tight contracts.”

CEF.UP – FIN Seminar/Webinar

Thursday – October 13^th, 2022 at 1:00 p.m. |Room 305| Online

“The Innovation Arms’ Race” – access the paper here

Farooq Ahmad – SKEMA Business School (joint work with Eric de Bodt and Jarrad Harford)

Abstract:

“Economists have long recognized that competition and innovation interact as key drivers of economic growth (Schumpeter, 1943; Arrow, 1962; Aghion and Howitt, 1992). Acknowledging this, regulators carefully scrutinize competitive behaviors that potentially affect innovation incentives, in particular in the field of M&A (Shapiro, 2012). Do acquisitions of innovative targets spur or stifle innovation? To address this question, we test the Innovation Arms Race hypothesis, providing a first large scale empirical investigation of M&A effects on acquirer rivals’ incentives to innovate and the equilibrium outcome resulting from this competitive process. Our results are consistent with the Innovation Arms Race hypothesis predictions: acquisitions of innovative targets push acquirer rivals to invest more in innovation, both internally through research and development (R&D) and externally through acquisition of innovative targets (the correlated investment prediction) and this increase in innovation investment under pressure of rivals leads to a decrease in firm market valuation (the value decrease prediction). These results are robust to endogeneity and are driven by High-Technology and (to some extent) Healthcare industries. This arms race process appears stronger for leaders and (to some extent) firms under strong competitive pressure (so-called neck-and-neck firms). Initial patents and patent citations based evidence shows no sign of innovation investment efficiency decline, suggesting that the Innovation Arms Race generates a transfer of economic rent favorable to consumers.”