The Effects of Antitrust Laws on Horizontal Mergers: International Evidence
Chune Young Chung, Iftekhar Hasan, JiHoon Hwang, Incheol Kim
Journal of Financial and Quantitative Analysis,
forthcoming
Abstract
This study examines how antitrust law adoptions affect horizontal merger and acquisition (M&A) outcomes. Using the staggered introduction of competition laws in 20 countries, we find antitrust regulation decreases acquirers’ five-day cumulative abnormal returns surrounding horizontal merger announcements. A decrease in deal value, target book assets, and industry peers' announcement returns are consistent with the market power hypothesis. Exploiting antitrust law adoptions addresses a downward bias to an estimated effect of antitrust enforcement (Baker (2003)). The potential bias from heterogeneous treatment effects does not nullify our results. Overall, antitrust policies seem to deter post-merger monopolistic gains, potentially improving customer welfare.
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Climate Change Exposure and the Value Relevance of Earnings and Book Values of Equity
Iftekhar Hasan, Joseph A. Micale, Donna Rapaccioli
Journal of Sustainable Finance and Accounting,
March
2024
Abstract
We investigate whether a firm’s exposure to climate change, as proxied by disclosures during quarterly earnings conference calls, provides forward-looking information to investors regarding the long-term association of stock prices with current earnings and the book values of equity. Following a key regulatory mandate around the formation of the cap-and-trade program to reduce emissions related to climate change, firms’ climate change exposure decreases the association between current earnings and stock prices while increasing the relevance of book values of equity (i.e., historical earnings). However, these relationships flip when the sentiment around climate change exposure is negative, suggesting that the risks related to climate change exposure provide forward-looking information to investors when they evaluate the ability of current earnings to predict firm values. Such a relationship is stronger for new economy firms and is sensitive to conservative accounting. We also observe that the inclusion of climate change disclosure to our models improves the joint ability of earnings and book values to predict stock prices.
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08.02.2024 • 3/2024
IWH-Insolvenztrend: Zahl der Firmenpleiten weiterhin hoch – Corona-Hilfen für schwache Unternehmen sind ein Grund
Nach dem Rekordwert im Dezember bleibt die Zahl der Insolvenzen von Personen- und Kapitalgesellschaften im Januar auf unverändert hohem Niveau, zeigt die aktuelle Analyse des Leibniz-Instituts für Wirtschaftsforschung Halle (IWH). Erklären lässt sich die heutige Lage auch mit den Staatshilfen während der Corona-Pandemie.
Steffen Müller
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IWH Alumni The IWH maintains contact with its former employees worldwide. We involve our alumni in our work and keep them informed, for example, with a newsletter. We also plan…
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Media Response Archive 2021 2020 2019 2018 2017 2016 December 2021 IWH: Ausblick auf Wirtschaftsjahr 2022 in Sachsen mit Bezug auf IWH-Prognose zu Ostdeutschland: "Warum Sachsens…
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COVID-19 Pandemic and Global Corporate CDS Spreads
Iftekhar Hasan, Miriam Marra, Thomas Y. To, Eliza Wu, Gaiyan Zhang
Journal of Banking and Finance,
February
2023
Abstract
We examine the impact of the COVID-19 pandemic on the credit risk of companies around the world. We find that increased infection rates affect firms more adversely as reflected by the wider increase in their credit default swap (CDS) spreads if they are larger, more leveraged, closer to default, have worse governance and more limited stakeholder engagement, and operate in more highly exposed industries. We observe that country-level determinants such as GDP, political stability, foreign direct investment, and commitment to crisis management (income support, health and lockdown policies) also affect the sensitivity of CDS spreads to COVID-19 infection rates. A negative amplification effect exists for firms with high default probability in countries with fiscal constraints. A direct comparison between global CDS and stock markets reveals that the CDS market prices in a distinct set of corporate traits and government policies in pandemic times.
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Corporate Culture and Firm Value: Evidence from Crisis
Yiwei Fang, Franco Fiordelisi, Iftekhar Hasan, Woon Sau Leung, Gabriel Wong
Journal of Banking and Finance,
January
2023
Abstract
Based on the Competing Values Framework (CVF), we score 10-K text to measure company culture in four types (collaborative, controlling, competitive, and creative) and examine its role in firm stability. We find that firms with higher controlling culture fared significantly better during the 2008–09 crisis. Firms with stronger controlling culture experienced fewer layoffs, less negative asset growth, greater debt issuance, and increased access to credit-line facilities during the crisis. The positive effect of the controlling culture is stronger among the financially-constrained firms. Overall, the controlling culture improves firm stability through greater support from capital providers.
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Firm Social Networks, Trust, and Security Issuances
Ming Fang, Iftekhar Hasan, Zenu Sharma, An Yan
European Journal of Finance,
No. 4,
2022
Abstract
We observe that public firms are more likely to issue seasoned stocks rather than bonds when theirs boards are more socially-connected. These connected issuers experience better announcement-period stock returns and attract more institutional investors. This social-connection effect is stronger for firms with severe information asymmetry, higher risk of being undersubscribed, and more visible to investors. Our conjecture is this social-network effect is driven by trust in issuing firms. Given stocks are more sensitive to trust, these trusted firms are more likely to issue stocks than bonds. Trustworthiness plays an important role in firms’ security issuances in capital markets.
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Military Directors, Governance and Firm Behavior
Chen Cai, Iftekhar Hasan, Yinjie (Victor) Shen, Shuai Wang
Advances in Accounting,
December
2021
Abstract
We build a large dataset of board of directors with military experience and document a substantial and persistent presence of independent military directors serving on corporate boards. We find that firms with independent military directors are associated with better monitoring outcomes, including less excessive CEO compensation, greater forced CEO turnover–performance sensitivity, and less earnings management.
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The State Expropriation Risk and the Pricing of Foreign Earnings
Iftekhar Hasan, Ibrahim Siraj, Amine Tarazi, Qiang Wu
Journal of International Accounting Research,
No. 2,
2021
Abstract
We examine the pricing of U.S. multinational firms' foreign earnings in regard to their risk of expropriation and unfair treatment by the governments of the countries in which their international subsidiaries are located. Using 8,891 firm-years observations during the 2001–2013 period, we find that the value relevance of foreign earnings increases with the improvement of the protection from state expropriation risk in the subsidiary host-countries. Our results are not driven by the earnings management practice, investor distraction, country informativeness, and political and trade relationship of a foreign country with the U.S. Furthermore, our results are robust to the confounding effects of country factors, measurement error in the variable of the risk of expropriation, the influence of private contracting institutions, and endogeneity in the decision of the location of subsidiaries.
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