Erwan Morellec (EPFL Lausanne) discussing Boris Nikolov on 'Agency Conflicts and Cash: Estimates from a Structural Model'

Boris Nikolov (University of Rochester) presenting 'Agency Conflicts and Cash: Estimates from a Structural Model' - Abstract: We estimate a dynamic model of firm investment and cash accumulation to ascertain whether agency problems affect corporate cash holding decisions. We model four specific mechanisms that misalign managerial and shareholder incentives: managerial bonuses based on current profits, limited managerial ownership of the firm, a managerial reference for firm size, and...

Robert Hansen (Tulane University) discussing Laurent Fresard on 'Cross-Listing, Investment Sensitivity to Stock Price and the Learning Hypothesis'

Laurent Fresard (HEC Paris) presenting 'Cross-Listing, Investment Sensitivity to Stock Price and the Learning Hypothesis' - Abstract: Using a large sample of U.S. cross-listings, we show that cross-listed firms have a higher sensitivity of corporate investment to stock price than non cross-listed firms. This difference materializes after foreign firms access the U.S. markets (as it does not exist before) and is persistent. These findings are strong and robust to various controls, e.g.,...

Annette Poulsen (University of Georgia) discussing Espen Eckbo on 'Deal anticipation and markup pricing in takeovers: A structural analysis'

Espen Eckbo (Tuck School of Business at Dartmouth) presenting 'Deal anticipation and markup pricing in takeovers: A structural analysis' - Abstract: Takeover rumors cause the market to anticipate the expected offer premium, resulting in a pre-bid target stock price runup. A runup may also reflect a surprise increase in he target's stand-alone value, possibly prompting the target to demand a markup of the offer price. Common sense suggests that bidders should rarely agree to markups: after...

Ulf Axelson (London School of Economics) discussing Alexei Zhdanov on 'R and D and the Market for Acquisitions'

Alexei Zhdanov (University of Lausanne) presenting 'R and D and the Market for Acquisitions' - Abstract: We show theoretically and empirically how an active acquisition market positively affects firm incentives to innovate and conduct R and D. Our model shows how the incentives of small firms to conduct R and D in order to innovate increase with competition, demand and the probability that they are taken over. In contrast, we show that large firms optimallymay decide to purchase smaller...

Eric de Bodt (Université Lille 2) discussing Bo Becker on 'Cyclicality of Credit Supply: Firm Level Evidence'

Bo Becker (Harvard University) presenting 'Cyclicality of Credit Supply: Firm Level Evidence' - Abstract: Theory predicts that there is a close link between bank credit supply and the evolution of the business cycle. Yet this effect has been hard to quantify in the time-series. While loan issuance falls in recession, it is not clear if this is due to demand or supply. We focus on firms’ substitution between bank debt and public bonds using firm-level data from 1990 to 2009. Any firm that...

Thomas Gehrig (University of Vienna) discussing Thomas Philippon on 'Optimal Interventions in Markets with Adverse Selection'

Thomas Philippon (New York University) presenting 'Optimal Interventions in Markets with Adverse Selection' - Abstract: We characterize cost-minimizing interventions to restore lending and investment when fiÖnancial markets fail because of adverse selection. Because the government intervenes without shutting-down Öfinancial markets, the strategic decision to participate in a governmentís program reveals private information and affects the borrowing terms of agents outside the program. This...

Thomas Noe (Oxford) discussing Enisse Kharroubi on 'Outside and Inside Liquidity: From Asset Shortage to Financial Crises'

Enisse Kharroubi (BIS) presenting 'Outside and Inside Liquidity: From Asset Shortage to Financial Crises' - Abstract: This paper studies the implications of a shortage of liquid asset for the occurrence of financial crises. Following Holmström and Tirole (1998), we provide a liquidity based model in which investors can issue short term liquid assets when they need to refinance distressed illiquid projects. Moreover the framework is augmented with an exogenous demand for liquid assets which...

François Degeorge (University of Lugano) discussing Vivian Fang on 'Does Stock Liquidity Enhance or Impede Firm Innovation?'

Vivian Fang (Rutgers University) presenting 'Does Stock Liquidity Enhance or Impede Firm Innovation?' - Abstract: There has been much debate about whether stock liquidity enhances or impedes firm innovation. Some fear that high stock liquidity hinders firms’ long-run investment in innovation by making managers myopic. Others believe that high stock liquidity makes stock prices more efficient which mitigates managerial myopia and enhances firm innovation. We document a negative relationship...

Milo Bianchi (Université Paris-Dauphine) discussing Ramin Baghai on 'Wrongful Discharge Laws and Innovation'

Ramin Baghai (London Business School) presenting 'Wrongful Discharge Laws and Innovation' - Abstract: We show that wrongful discharge laws (laws that inhibit the common-law doctrine of employment-at-will) spur innovation. In our model, wrongful discharge laws make it costly for firms to arbitrarily discharge employees. This enables firms to commit to not punish short-run failures of employees and, thereby, encourage employees to exert greater effort in risky, but potentially mould-breaking,...

Karin Thorburn (NHH Bergen) discussing Gregor Matvos on 'Are Consumers Affected by Durable Goods Makers’ Financial Distress? The Case of Auto Manufacturers'

Gregor Matvos (University of Chicago) presenting 'Are Consumers Affected by Durable Goods Makers’ Financial Distress? The Case of Auto Manufacturers' -Abstract: Theory suggests the financial decisions of durable goods makers can impose spillovers on their consumers. Namely, the consumption stream that durable goods provide frequently depends on services provided by the manufacturer itself (e.g., warranties, spare parts availability, maintenance and upgrades). Manufacturer bankruptcy, or...

Philip Valta (HEC Paris) discussing Ing-Haw Cheng on 'The Hazards of Debt: Rollover Freezes, Incentives, and Bailouts'

Ing-Haw Cheng (University of Michigan) presenting ''The Hazards of Debt: Rollover Freezes, Incentives, and Bailouts'' - Abstract: We investigate the trade-off etween incentive provision and inefficient rollover freezes for a firm financed with short-term debt. First, debt maturity that is too short-term is inefficient, even with incentive provision. The optimal maturity is an interior solution that avoids excessive rollover risk while providing sufficient incentives for the manager to avoid...

Francesca Cornelli (London Business School) discussing Sreedhar Bharath on 'Does capital market myopia affect plant productivity'? Evidence from going private transactions'

Sreedhar Bharath (Arizona State University) on 'Does capital market myopia affect plant productivity? Evidence from going private transactions' - Abstract: One influential criticism of the stock market oriented U.S. financial system is that its excessive focus on short term quarterly earnings forces public firms to behave in a myopic manner. We hypothesize that if capital markets pressure listed firms to be myopic in a way that impacts efficiency, then going private (when myopia is...

Gordon Phillips (University of Maryland) discussing Joan Farre-Mensa on 'Why Are Most Firms Privately-held?'