Mergers and Venture Financing
Paper Session
Saturday, Jan. 8, 2022 12:15 PM - 2:15 PM (EST)
- Chair: Miguel Ferreira, Nova School of Business and Economics
The Virtuous Cycle of Innovation and Capital Flows
Abstract
Does local innovation attract venture capital? Using a regime change in the commercialization of university innovation in 1980 that strongly increased university incentives to patent and license discoveries, we document the complement to Kortum and Lerner (2000)’s finding that financing leads to future innovation. Because universities have different technological strengths, each local area surrounding a university experienced an increase in innovation relevant to particular sets of industries after 1980—industries which differ widely across university counties. Comparing industries within a county that were more versus less related to the local university’s innovative strengths, we show that venture capital dollars after 1980 flowed systematically towards geographic areas and industries with the greatest sudden influx of innovation from universities. In contrast, the geographic and industry distribution of corporate patenting and prior venture financing in the pre-period does not predict a differential increase in future venture financing, suggesting that our findings are not solely driven by the 1979 pension fund reform that increased financing available to VCs across the board. The results support the notion of a “virtuous cycle” wherein innovation serves to draw capital investment that then funds future innovation.Do Firms With Specialized M&A Staff Make Better Acquisitions?
Abstract
We open the black box of the M&A decision process by constructing a comprehensive sample of US firms with specialized M&A staff from 2000 to 2017 and investigate whether firms with such staff make better acquisitions. We find that specialized M&A staff is an economically important determinant of acquisition performance measured by stock price reactions to announcements, long-run stock returns, operating performance, divestitures, and analyst earnings forecasts. This effect is lower for firms with powerful or overconfident CEOs. We provide evidence on mechanisms through which specialized M&A staff improves acquisition performance. For identification, we use the staggered recognition of inevitable disclosure doctrine as a source of exogenous variation in the employment of specialized M&A staff.Mergers under the Microscope: Analyzing Conference Call Transcripts
Abstract
Many M&A deal announcements are accompanied with a conference call to discuss deal details and address market participants’ demand for information. We find that calls are associated with positive market reactions and a higher likelihood of deal completion. Using a topic modelling approach, we uncover 20 highly interpretable topics from the call transcripts. Market reactions are more positive when the call communicates more “hard” information as opposed to “soft” information, revealing different disclosure strategies depending on deal quality. Governance-related issues, although not significantly correlated with stock returns, are prominently discussed and related to the latent motivation for holding calls.Discussant(s)
Sabrina Howell
,
New York University
Francisco Queiro
,
Nova School of Business and Economics
Karin Thorburn
,
Norwegian School of Economics
Serdar Dinc
,
Rutgers University
JEL Classifications
- G3 - Corporate Finance and Governance