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Articles 1 - 7 of 7
Full-Text Articles in Business
Can Mergers And Acquisitions Internalize Positive Externalities In Funding Innovation?, Leo Li, Mark Liu
Can Mergers And Acquisitions Internalize Positive Externalities In Funding Innovation?, Leo Li, Mark Liu
Institute for the Study of Free Enterprise Working Papers
Fundamental innovation usually involves huge upfront costs, but the benefits are spread across various sectors of the economy. Given the large costs and limited appropriability of the benefits associated with the innovation, individual firms underinvest in these innovations relative to the socially optimal level. We find that mergers and acquisitions (M&As) can internalize the positive externalities by merging firms from both the user industries and the producer industries of an innovation. Using the US patent citation dataset, we define the user and producer relationship between each pair of industries and between each pair of industry and technological class. We then …
Investment In Human Capital And Labor Mobility: Evidence From A Shock To Property Rights, Christopher P. Clifford, William C. Gerken
Investment In Human Capital And Labor Mobility: Evidence From A Shock To Property Rights, Christopher P. Clifford, William C. Gerken
Institute for the Study of Free Enterprise Working Papers
We show that the assignment of property rights to client relationships affects employee behavior in the industry for financial advice. Our identification comes from staggered firm-level entry into the Protocol for Broker Recruiting. The protocol effectively transfers the ownership of the client relationship from the firm to the employee. We document that entering into the protocol increases employee labor mobility among member firms. Further, we find that upon protocol inclusion, employees are less likely to generate customer complaints and more likely to invest in their own general human capital, but less likely to invest in firm-specific human capital. We use …
Can Credit Rating Agencies Affect Election Outcomes?, Igor Cunha, Miguel A. Ferreira, Rui C. Silva
Can Credit Rating Agencies Affect Election Outcomes?, Igor Cunha, Miguel A. Ferreira, Rui C. Silva
Institute for the Study of Free Enterprise Working Papers
We show that credit rating agencies can have a significant effect on election outcomes. We identify these effects by exploiting exogenous variation in municipal bond ratings due to Moody’s recalibration of its scale in 2010. We find that incumbent politicians in upgraded municipalities experience an increase in their likelihood of reelection and their vote shares. These rating upgrades improve voters’ opinions about the incumbent and produce positive wealth effects through voters’ holdings of local municipal bonds. In addition, rating upgrades cause an expansion of local governments’ debt capacity that allows the incumbent to increase spending and improve local economic conditions.
The Buffering Effect Of Brands For Companies Facing Legislative Homogenization: Evidence From The Introduction Of Sarbanes-Oxley, Felipe Thomaz, Leonce Bargeron, John Hulland, Chad Zutter
The Buffering Effect Of Brands For Companies Facing Legislative Homogenization: Evidence From The Introduction Of Sarbanes-Oxley, Felipe Thomaz, Leonce Bargeron, John Hulland, Chad Zutter
Institute for the Study of Free Enterprise Working Papers
Brands not only enhance the positive impact of marketing initiatives, but also buffer the firm from the full consequences of unexpected and negative market shifts. While this protective effect has been demonstrated for firm-specific events (e.g., product recalls, public relations crises), its impact has not been observed in response to market-wide environmental shifts. Our study demonstrates the buffering properties of strong brands in exactly such a context: the passing of new legislation. By examining responses to the introduction of the Sarbanes-Oxley Act of 2002, we show that (1) firms exhibit a rapid and homogeneous response as they comply and adjust …
Understanding Precautionary Cash At Home And Abroad, Michael W. Faulkender, Kristine W. Hankins, Mitchell A. Petersen
Understanding Precautionary Cash At Home And Abroad, Michael W. Faulkender, Kristine W. Hankins, Mitchell A. Petersen
Institute for the Study of Free Enterprise Working Papers
In the presence of market frictions, it is optimal for firms to stockpile cash to fund investment projects which may arise in the future. Prior work has documented that firms’ precautionary savings motives predict variation in the size of firms’ cash stockpiles. The dramatic run-up in cash stockpiles raises the question of why these precautionary motives have increased. In the presence of repatriation taxes, foreign and domestic cash are imperfect substitutes. We show that although precautionary motives explain variation in the level of cash held domestically, they provide little explanatory power for the level of foreign cash. Multinational firms’ foreign …
Hedge Fund Boards And The Market For Independent Directors, Christopher P. Clifford, Jesse A. Ellis, William C. Gerken
Hedge Fund Boards And The Market For Independent Directors, Christopher P. Clifford, Jesse A. Ellis, William C. Gerken
Institute for the Study of Free Enterprise Working Papers
We provide the first examination of hedge fund boards and their directors. The majority of directorships are held by extremely busy independent directors. These directors are sought after by funds because they have more reputational capital at stake, making them independent and credible monitors whose presence can certify fund quality to investors. Busy independent directors are more likely to be hired by high quality funds, and their departure from the board is associated with investor withdrawals. Moreover, funds with busy independent directors are less likely to commit fraud, abuse discretionary liquidity restrictions, or engage in performance-based risk shifting.
Transaction Complexity And The Movement To Fair Value Accounting, Pinky Rusli, Xinlei Zhao, David A. Ziebart
Transaction Complexity And The Movement To Fair Value Accounting, Pinky Rusli, Xinlei Zhao, David A. Ziebart
Institute for the Study of Free Enterprise Working Papers
Our global economy has pushed the complexity of business transactions to a new level, as companies now employ sophisticated contracts and financial instruments. However, it is unclear whether accounting standards are able to effectively capture transaction complexity, which has been growing at a rapid pace. In this study, we examine three questions related to transaction complexity: (1) Do accounting standards reflect differences in the complexity of the transactions being recorded? (2) Does the use of mark-to-market (i.e., fair value) accounting reduce the complexity of standards by relying on market valuations to capture transaction complexity? (3) Does the reliance on fair …