I am a Ph.D. candidate in the Department of Economics at the University of Chicago. I am on the job market this year, and will be available for interviews at the ASSA meetings in New Orleans this January. I expect to receive my Ph.D. in June 2008.
Fields of Interest
Corporate Finance, Industrial Organization, Labor Economics
Topics: Mergers, Theory of the Firm, Capital Structure, CEO Pay, Volatility
Job Market Paper
Stock Performance and Merger Choices [pdf]
Firms that have experienced recent gains in the stock market are more likely to engage in deals that redraw their boundaries - whether by acquiring other firms, being acquired themselves, or by doing spinoffs. Merging firms also appear to match assortatively by stock performance: successful firms merge with other successful firms. I show how both these patterns arise naturally in a model where reorganization imposes nontrivial costs.
Assortative matching by stock performance is difficult to test directly. Showing that industry and time adjusted stock returns of merger partners are positively correlated is not sufficient. This is because the correlation could be driven by unmeasured operational similarities between merger partners rather than by similarity of financial performance per se. I propose another test for assortative matching based on market reactions to merger announcements. If firms sort by performance, and performance is not perfectly observed, then merger announcements will convey information to the market about the performance of firms. The market response to a firm announcing a merger would be increasing in its proposed partner's performance (since that is an indication that the firm itself is of high quality). And, holding constant the performance of the merger partner, the market response would be declining in the firm's own past performance (since that is an indication that the firm was previously overvalued). I find empirical support for this effect in the market response to merger announcements.
Other Papers
Volatility, Human Capital and CEO Pay. Working Paper.
[pdf]
Why Don't More Leveraged Firms Have More Volatile Stock? Working Paper.
[pdf]
The Coordinating Role of Firms. Working Paper.
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Why Do Public Enterprises and Protected Private Monopolies Have Inflated Costs? Working Paper.
References
