Managers' cultural origin and corporate response to an economic shock

We exploit the exogenous Covid-19 shock in a bicultural area of Italy to identify cultural differences in the way companies respond to economic shocks. Firms with managers of diverse cultural backgrounds resort to different forms of government aid, diverge in their investment decisions, and have different growth rates. These findings are consistent with cultural differences in time preferences and debt aversion. Specifically, we find that the response of managers belonging to a more long-term oriented culture is characterized by a lower recourse to debt, more investments and higher growth rates. Overall, our results show that the cultural origin of managers significantly affects firms' reaction to economic shocks and real economic outcomes

Your Former Employees Matter : Private Equity Firms and Their Financial Advisors

I study the impact of previous employment networks on private equity firms‟ choice of financial advisors. In a unique micro-level data set I observe 1,326 individuals, who have been directly involved in 1,285 transactions and their changes of occupation from financial advisors to private equity professionals. I find that the social networks arising from these labor market movements affect private equity firms' choice of financial advisors as well as the sourcing of information and deals from sell-side advisors to private equity firms. On average, the unconditional probability to be mandated as a financial advisor increases by 2.8 percentage points from 3.6% to 6.4% if a former employee of the financial advisor is among those private equity professionals who constitute the private equity deal team for that particular transaction. Private equity firms, on their part, have a 19.0 percentage points higher probability to be included in a bidding process and a 13.5 percentage points higher probability of winning an auction when their former employers conduct the auction. Moreover, I find that firms pay lower revenue transaction multiples in acquisitions where their former employers advise them compared to other deals

Government awards as economic instruments of governance

International audienc

Government Involvement in the Corporate Governance of Banks

International audienceOn March 18, 1976, the Swedish parliament voted on a bill that, if approved, would have substantially increased both the scale and scope of government representation on bank boards. Since parliament was hung, the outcome of the vote was decided by a lottery. I exploit this lottery to study the causal effect on shareholder value of government involvement in the corporate governance of banks. I find that the rejection of the bill resulted in positive abnormal returns that persisted in the following days. The results suggest that unsolicited government involvement in the corporate governance of banks is harmful for owners

Dual Role Advisors and Conflicts of Interest

An advisor to a firm targeted in a merger or acquisition that simultaneously is involved in financing the bidding part of the deal is referred to as a dual role advisor. Being a dual role advisor can create conflicts of interest through the possible perception that the investment bank's advice to the seller in the bidding process is tainted by a desire on the part of the advisor to obtain additional fees from financing the successful bidder. I find support for this fear in a stud y of 1,023 public US mergers and acquisitions over the period 1993 to 2008. Conflicts of interest are manifested through that deals which involve a dual role advisor are, compared to deals with no dual role advisors; (a) performed at lower premium, (b) are more likely to be subject to a lawsuit, (c) feature lower merger advisor fees and (d) are commensurate with higher announcement returns for bidders. Overall, the results suggest that investment banks may not have fulfilled their obligation of obtaining the highest possible price on behalf of the seller and I find no evidence that dual role advising is a helpful feature in transactions where it might be difficult to otherwise obtain bidding financing. Interestingly, target firms with sound corporate governance practices are less likely to encounter dual role situations