nep-cfn New Economics Papers
on Corporate Finance
Issue of 2015‒01‒09
three papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Director Networks and Takeovers By Renneboog, L.D.R.; Zhao, Y.
  2. Active Risk Management and Banking Stability By Silva Buston, C.F.
  3. Earnings Management and Performance in Family-Controlled Firms:Evidence from an Emerging Economy By Mauricio Jara-Bertin; Jean P. Sepulveda

  1. By: Renneboog, L.D.R. (Tilburg University, Center For Economic Research); Zhao, Y. (Tilburg University, Center For Economic Research)
    Abstract: Abstract: We study the impact of corporate networks on the takeover process. We find that better connected companies are more active bidders. When a bidder and a target have one or more directors in common, the probability that the takeover transaction will be successfully completed augments, and the duration of the negotiations is shorter. Connected targets more frequently accept offers that involve equity. Directors of the target firm (who are not interlocked) have a better chance to be invited to the board of the combined firm in connected M&As. While connections have a clear impact on the takeover strategy and process, we do not find evidence that the market acknowledges connections between bidders and targets as the announcement returns are not statistically different from those bidders and targets which are ex ante not connected.
    Keywords: Mergers and Acquisitions; Director Networks; Centrality; Connections
    JEL: D85 G14 G34
    Date: 2013
  2. By: Silva Buston, C.F. (Tilburg University, Center For Economic Research)
    Abstract: Abstract: This paper analyzes the net impact of two opposing effects of active risk management at banks on their stability: higher risk-taking incentives and better isolation of credit supply from varying economic conditions. We present a model where banks actively manage their portfolio risk by buying and selling credit protection. We show that anticipation of future risk management opportunities allows banks to operate with riskier balance sheets. However, since they are better insulated from shocks than banks without active risk management, they are less prone to insolvency. Empirical evidence from US bank holding companies broadly supports the theoretical predictions. In particular, we fi nd that active risk management banks were less likely to become insolvent during the crisis of 2007-2009, even though their balance sheets displayed higher risktaking. These results provide an important message for bank regulation, which has mainly focused on balance-sheet risks when assessing fi nancial stability.
    Keywords: Financial innovation; credit derivatives; financial stability; financial crisis
    Date: 2013
  3. By: Mauricio Jara-Bertin; Jean P. Sepulveda (School of Business and Economics, Universidad del Desarrollo)
    Abstract: This study introduces an earnings management dimension to compute premanipulated accounting performance to determine whether family-controlled firms have higher performance relative to non-family-controlled firms. Using a premanipulated return on assets measure for Chilean firms dataset, we find that the premanipulated performance of familycontrolled firms is superior to that of non-family-controlled firms. We also show that the presence of institutional investors in the firm’s ownership structure has a positive influence on performance of family companies. The results suggest that earnings management behavior is not sufficient to explain the higher performance of family-controlled firms that has been reported in the literature.
    Keywords: Family-controlled firms, earnings management, accounting performance.
    JEL: G32 G34
    Date: 2014–11

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