Three essays in empirical corporate finance

Davari, Hamed

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URN: urn:nbn:de:bsz:180-madoc-649923
Document Type: Doctoral dissertation
Year of publication: 2023
Place of publication: Mannheim
University: Universität Mannheim
Evaluator: Maug, Ernst
Publication language: English
Institution: Business School > ABWL u. Corporate Finance (Maug 2006-)
Subject: 650 Management
Keywords (English): mergers and acquisitions , technology acquisition , corporate lobbying , innovation economics
Abstract: Firms engage in transactions to reorganize their activities and adapt to their dynamic environment. This dissertation focuses on spin-offs, carve-outs, mergers and acquisitions as major corporate transactions. In the first chapter, I ask how reorganization of a firm through two common divestiture methods, namely, spin-offs and carve-outs affect the incentives of its pool of knowledge workers. This is an important question, because on the one hand, innovation ensures sustainability of firms and also is crucial for the economic growth. On the other hand, inventors, in contrast to other employees, play a very essential role in innovation. Based on the theoretical literature in organizational economy, I build two main hypotheses regarding departure and productivity of the inventors who experience a spin-off or a carve-out. I conjecture that these inventors would enjoy the less hierarchical organizational structure of the spun-off or the carves-out firm, which provides them with more authority in choosing their own innovative activities. Hence, I expect these inventors to depart less and produce more innovative outputs. I employ a difference-in differences methodology on a matched sample and provide support for these hypotheses. However, I document a very interesting behaviour from the inventors in response to a divestiture: even though they exhibit a lower innovation output in terms of number of filed patents (quantity) after the divestiture, they show a large and significant increase in patent citation, a measure for quality of innovation output. The second chapter investigates the relationship between firms’ inventor recruiting and technology acquisition decisions. I explore how firms’ hiring of inventors with similar or new technological expertise affects their target selection in mergers and acquisitions. The findings reveal that firms hiring inventors with similar technological expertise tend to acquire technologically similar targets, while those hiring inventors with new technological expertise are more likely to acquire technologically distant targets. Furthermore, this study also sheds light on the channels through which these two decisions may be related. I provide strong support for the channel, in which firms assess the complementarity of new technologies with their existing technology portfolio by initially hiring inventors with the desired expertise and subsequently choosing targets similar to the inventors with the highest complementarity. The third chapter focuses on the role of rivals in the merger review process and their lobbying activities on antitrust agencies’ decisions. I examine the association between rivals’ lobbying efforts and the likelihood of a merger being challenged, focusing on the lobbying activities and connections of rivals to politicians in judiciary committees of the House and Senate. The results support the hypothesis that lobbying activities of rivals who react positively to the merger announcement are negatively associated with the merger being challenged, while lobbying activities of rivals who react negatively to the merger announcement are positively associated with the merger being challenged. I further establish a causal link between rivals’ lobbying activities and merger review outcomes by exploiting the unexpected departure of influential politicians from the judiciary committees of the House and Senate.

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