{"title":"Investor horizons and corporate policies under uncertainty","authors":"C. Dreyer, Oliver Schulz","doi":"10.1002/RFE.1129","DOIUrl":"https://doi.org/10.1002/RFE.1129","url":null,"abstract":"Investors are not a homogeneous group. They comprise a broad spectrum of shareholders who differ, among other things, in terms of their investment horizon. While investors with a short investment horizon want to maximize current stock prices, as they expect to exit their positions soon, longterm investors seek to maximize the present value of future cash flows (e.g., Gaspar et al., 2004; Stein, 1996). In recent decades, researchers have begun focusing on distinguishing between shareholders in this manner, particularly in the context of CEO remuneration (Bolton et al., 2005, 2006; Cadman & Sunder, 2014) and monitoring of managers (Chen et al., 2007; Gaspar et al., 2005). Another highly debated topic, because of its growing international prominence, is uncertainty. Following major shocks, including the 9/11 terrorist attacks, the 2007/2008 global financial crisis, the Brexit referendum, and most recently, the COVID19 pandemic, uncertainty tends to rise sharply (see Altig et al., 2020; Bloom, 2014; Hill et al., 2019). Empirical evidence shows that uncertainty can have strong adverse effects on various corporate policies, such as capital expenditures (Gulen & Ion, 2016; Julio & Yook, 2012; Kang et al., 2014; Kim & Kung, 2017), employment growth (Baker et al., 2016; Bloom, 2009; Stein & Stone, 2013), and share repurchases (Pirgaip & Dinçergök, 2019). However, the extant literature does not examine if these uncertainty– corporate policy relationships are a function of shareholder horizons. This study aims to bridge this gap by focusing on annual firmlevel Investment, Employment, and Share repurchase decisions as key corporate policies. Investment rates and employment growth are key indicators of the real economy (Baker et al., 2016), which provide a sensible outlook on future expectations. As with capitalintensive share buybacks, they are similarly dependent on assumptions about future business conditions (Pirgaip & Dinçergök, 2019). We specifically refrain from examining dividend payments because they are considered sticky and thus relatively stable over time (Lintner, 1956), while share repurchases are Received: 7 September 2020 | Revised: 16 January 2021 | Accepted: 19 February 2021 DOI: 10.1002/rfe.1129","PeriodicalId":51691,"journal":{"name":"Review of Financial Economics","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2021-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1002/RFE.1129","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49545440","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"What is different about private equity-backed acquirers?","authors":"Benjamin Hammer, Heiko Hinrichs, Denis Schweizer","doi":"10.1002/rfe.1128","DOIUrl":"https://doi.org/10.1002/rfe.1128","url":null,"abstract":"This paper investigates whether private equity (PE)-backed acquirers have a “parenting advantage” in the mergers & acquisitions (M&A) market. We employ a sample of 788 PE-backed firms and a carefully matched control group of 6,652 non-PE-backed peers, for which we observe the entire acquisition history over a 19-year time span. Difference-in-differences estimates suggest that PE backing induces a sizeable but short-lived boost to acquisition activity, while the type and complexity of acquisitions are similar to those of non-PE-backed peers. These results are consistent with the idea that PE backing enhances execution and speed in the M&A market. We find that portfolio firms benefit from this boost through improved valuations and margins. The extent to which this is true, however, depends on the institutional setting of the PE owner. Our results indicate that add-on acquisitions are detrimental if PE owners are late buyers or suffer from limited attention problems.","PeriodicalId":51691,"journal":{"name":"Review of Financial Economics","volume":"69 1","pages":""},"PeriodicalIF":1.2,"publicationDate":"2021-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138529153","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Wolfgang Breuer, Manuel Hass, David Johannes Rosenbach
{"title":"The impact of CEO power and institutional discretion on CSR investment","authors":"Wolfgang Breuer, Manuel Hass, David Johannes Rosenbach","doi":"10.1002/rfe.1131","DOIUrl":"https://doi.org/10.1002/rfe.1131","url":null,"abstract":"Based on a large international sample, we show how the decision-making power of CEOs in conjunction with prevailing institutional discretion relates to corporate resources allocated toward CSR strategy. First, especially with greater institutional discretion, powerful CEOs pursue exaggerated CSR strategies aiming at reputational gains for their private benefit, while not necessarily bearing the costs of their decisions. Second, such CEO-induced CSR enhancements turn out to be defective CSR overinvestment, ultimately entailing a decrease in firm value. By complementing organizational factors with institutional characteristics, we refute previous contradicting empirical evidence regarding a significant CEO effect and show a conditional relation between CEO power and CSR choice. Our results are robust to alternative sample compositions, different variable definitions, and various methodological specifications.","PeriodicalId":51691,"journal":{"name":"Review of Financial Economics","volume":"1 4 1","pages":""},"PeriodicalIF":1.2,"publicationDate":"2021-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138529155","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"What’s really in a deal? Evidence from textual analysis of M&A conference calls","authors":"Wenyao Hu, Thomas Shohfi, Runzu Wang","doi":"10.1002/rfe.1126","DOIUrl":"https://doi.org/10.1002/rfe.1126","url":null,"abstract":"Using a sample of 814 transcripts from 2011 to 2018, we examine information within merger and acquisition conference calls. Textual analysis reveals significant differences between the content of M&A call transcripts and both contemporaneous corporate press releases and prior earnings conference calls. We find participation of target executive types in M&A calls occurs more frequently in diversifying acquisitions and is related to payment choice consistent with promoting managerial sector-specific skills and incentive alignment, respectively. Retention of participating target executives is associated with a negative market reaction. We also identify a negative relation between textual sentiment and market reaction consistent with a response to higher levels of information asymmetry. Greater quantitative information, however, is positively related to the market reaction of M&A calls. We develop targeted M&A motive dictionaries to identify financial and strategic content within call transcripts. Consistent with prior literature on merger motivation, deals with more finance (strategy)-oriented words have a higher (lower) market reaction. Overall, our results show that deal-related textual analysis explains a highly significant and economically important component of gains/losses to acquirers.","PeriodicalId":51691,"journal":{"name":"Review of Financial Economics","volume":"22 1","pages":""},"PeriodicalIF":1.2,"publicationDate":"2021-01-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138529154","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Strategic Decisions in Takeover Auctions: Recent Developments","authors":"B. Eckbo, A. Malenko, K. Thorburn","doi":"10.1146/annurev-financial-012720-013903","DOIUrl":"https://doi.org/10.1146/annurev-financial-012720-013903","url":null,"abstract":"We review recent research into how firms navigate four complex decisions in corporate takeovers: (a) deal initiation, (b) pre-offer toehold acquisition, (c) the initial (public) offer price, and (d...","PeriodicalId":51691,"journal":{"name":"Review of Financial Economics","volume":"12 1","pages":"237-276"},"PeriodicalIF":1.2,"publicationDate":"2020-11-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1146/annurev-financial-012720-013903","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43271975","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Portfolio Choice Over the Life Cycle: A Survey","authors":"Francisco Gomes","doi":"10.1146/annurev-financial-012820-113815","DOIUrl":"https://doi.org/10.1146/annurev-financial-012820-113815","url":null,"abstract":"Life-cycle portfolio choice models capture the role of human capital, housing, borrowing constraints, background risk, and several other crucial ingredients for determining the savings and investme...","PeriodicalId":51691,"journal":{"name":"Review of Financial Economics","volume":"12 1","pages":"277-304"},"PeriodicalIF":1.2,"publicationDate":"2020-11-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1146/annurev-financial-012820-113815","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42776837","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Global Banking: Toward an Assessment of Benefits and Costs","authors":"C. Buch, L. Goldberg","doi":"10.1146/annurev-financial-021920-112021","DOIUrl":"https://doi.org/10.1146/annurev-financial-021920-112021","url":null,"abstract":"Global activities of banks are a core manifestation of broader patterns of globalization of production, trade, and finance. This article reviews the extensive recent empirical and theoretical liter...","PeriodicalId":51691,"journal":{"name":"Review of Financial Economics","volume":"12 1","pages":"141-175"},"PeriodicalIF":1.2,"publicationDate":"2020-11-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1146/annurev-financial-021920-112021","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49307029","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Information search methods and financial decisions","authors":"Yosef Bonaparte, F. Fabozzi, David Koslowsky","doi":"10.1002/rfe.1125","DOIUrl":"https://doi.org/10.1002/rfe.1125","url":null,"abstract":"","PeriodicalId":51691,"journal":{"name":"Review of Financial Economics","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2020-10-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1002/rfe.1125","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43279592","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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