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Full-Text Articles in Business
Location, Proximity, And M&A Transactions, Ye Cai, Xuan Tian, Han Xia
Location, Proximity, And M&A Transactions, Ye Cai, Xuan Tian, Han Xia
Finance
In this paper, we examine how the geographic location of firms affects acquisition decisions and value creation for acquirers in takeover transactions. We find that firms located in an urban area are more likely to receive a takeover bid and complete a takeover transaction as a target than firms located in rural areas, and takeover deals involving an urban target are associated with higher acquirer announcement returns, after controlling for the proximity between the target and the acquirer. In addition, a target's urban location significantly attenuates the negative effect of a long distance between the target and the acquirer on …
Bad Corporate Marriages: Waking Up In Bed The Morning After, Ye Cai, Hersh Shefrin
Bad Corporate Marriages: Waking Up In Bed The Morning After, Ye Cai, Hersh Shefrin
Finance
This paper examines corporate risk taking behavior in the wake of unsuccessful merger activities. We find that relative to other firms, firms that made bad acquisitions take both more systematic risk and more idiosyncratic risk. Moreover, higher risk is associated with greater value destruction and stronger corporate governance. The increased risk can be traced to increased cash flow volatility, increased leverage, decreased asset liquidity, more investment in R&D, and more equity-based executive compensation. These findings are in line with the behavioral approach suggesting that in the domain of losses, decision makers generally become more tolerant of risk.
Do Entrepreneurs Make Good Vcs?, Ye Cai, Merih Sevilir, Xuan Tian
Do Entrepreneurs Make Good Vcs?, Ye Cai, Merih Sevilir, Xuan Tian
Finance
Using hand-collected data on the backgrounds of venture capitalists (VCs), we show that in a typical venture capital firm in our sample, 13.9% of VCs have been entrepreneurs before becoming a VC, referred to as entrepreneur VCs. Both OLS and 2SLS analyses suggest that venture capital firms employing a greater fraction of entrepreneur VCs have better performance. In addition, the positive effect of entrepreneur VCs on venture capital firm performance is stronger for smaller and younger venture capital firms, and venture capital firms specializing in high-tech industries and in early-stage investments. We further explore performance implications of VCs with prior …
Are They Different? Ceos Made In Ceo Factories, Ye Cai, Merih Sevilir, Jun Yang
Are They Different? Ceos Made In Ceo Factories, Ye Cai, Merih Sevilir, Jun Yang
Finance
We examine the employment histories of CEOs at large US companies and find that a disproportionately large number of CEOs are originated from a small number of high-profile firms that are praised for their superior abilities in training and developing corporate leaders, referred to as CEO factories. Specifically, 20.5% of all CEOs appointed at the S&P 1500 firms from 1992 to 2010 came from 36 CEO factories. CEOs originated from those CEO factories are referred to as factory CEOs. Appointments of factory CEOs are associated with significantly larger announcement returns than the appointments of CEOs without work experiences at a …
Common Auditors In M&A Transactions, Ye Cai, Yongtae Kim, Jong Chool Park, Hal D. White
Common Auditors In M&A Transactions, Ye Cai, Yongtae Kim, Jong Chool Park, Hal D. White
Accounting
We examine merger and acquisition (M&A) transactions in which the acquirer and the target share a common auditor. We predict that a common auditor can help merging firms reduce uncertainty throughout the acquisition process, which allows managers to more efficiently allocate their capital, resulting in higher quality M&As. Consistent with our prediction, we find that deals with common auditors have higher acquisition announcement returns than do non-common-auditor deals. Further, we find that the common-auditor effect is more pronounced for deals with greater pre-acquisition uncertainty and deals involving acquirers and targets that are audited by the same local office of the …