This paper shows that investment banks that advise acquirers of assets negotiate favourable terms when they invest their own money in the deal, but lead their clients to overpay when they do not have financial incentives. Acquirers pay the smallest premiums in divisional MBOs when advised by the investment bank that finances the deal, and the largest premiums in interfirm asset sales when advised by an investment bank remunerated contingent on deal completion. Premiums are in between the two extremes when acquirers do not use advisors. These results are attributed to investment bank incentives, which exacerbate the information asymmetry between buyers and sellers of assets.

Previous research on asset sales has emphasized the divestment motivation and the use of the proceeds from the sale as determinants of selling firm value gains. In contrast, this paper explores the extent to which the relevant information necessary to evaluate sell-offs is embodied in the profitability of the sale, i.e. the price received by the seller over the value-in-use of the divested assets, where the latter is a function of past operating earnings and book value. Our empirical results show that sell-off profitability is substantially more significant in explaining the market reaction to divestiture announcements than the previous literature has suggested. We provide strong evidence of a positive relation between selling firm abnormal returns during sell-off announcements and profit on the sale, which remains significant after controlling for the motivation behind the sell-off, the use of the proceeds from the sale and the presence of agency costs of managerial discretion. We conclude that sell-off profitability explains a major portion of selling firm abnormal returns and is one of the most significant determinants of the market reaction to divestiture announcements.

Corporate events happen in waves. In this paper, we examine the timing patterns of 5 different types of corporate event waves (new stock and seasoned equity issues, stock- and cash-financed acquisitions, and stock repurchases) using a comprehensive data set of more than 151,000 corporate transactions over the 25-year period from 1980 to 2004. We document a distinctive pattern, previously not found in the literature, in the way stock-related waves form. Corporate waves seem to start with new issue waves (seasoned equity offering preceding initial public offering waves), followed by stock-financed merger waves, followed in turn by repurchase waves. Our results hold over separate decades and across industries. Our results seem consistent with both the neoclassical efficiency hypothesis and the misvaluation hypothesis, and there are distinct periods when one or the other appears dominant.

Using a novel typology of serial acquirers, we examine several puzzles documented in the prior literature. We show that acquisitions by different types of acquirers are driven by different factors, they acquire different sizes of targets, and subsequent acquisitions by acquirers are predictable ex ante. Controlling for market anticipation, the most frequent serial acquirers do not earn declining returns as they continue acquiring, while less frequent acquirers do. Our methodology enhances our understanding of serial acquisition dynamics, anticipation, and economic value adjustments. The methodology is likely to be relevant to topics related to event anticipation beyond those covered in this study.

We analyze related party transactions between Chinese publicly listed firms and their state-owned shareholders to examine whether companies benefit or lose from the presence of government shareholders and politically connected directors. Minority shareholders seem to be expropriated in firms controlled by local governments, firms with a large proportion of local government directors on their board, firms without central government directors, and firms in provinces where local government bureaucrats are less likely to be prosecuted for corruption. In contrast, firms controlled by the central government (or having central government affiliated directors), benefit in related party transactions with their government parents.

We examine a sample of 254 related party and arms’ length acquisitions and sales of assets in Hong Kong during 1998–2000. Our analysis shows that publicly listed firms enter deals with related parties at unfavourable prices compared to similar arms’ length deals. Firms acquire assets from related parties by paying a higher price compared to similar arms’ length deals. In contrast, when they sell assets to related parties, they receive a lower price than in similar arms’ length deals. With the exception of audit committees, corporate governance characteristics have limited impact on transaction prices. Firms with audit committees on their boards pay lower prices to related parties for acquisitions and receive higher prices from related parties from divestments.

Using multiple measures of attack proximity, we show that CEOs employed at firms located near terrorist attacks earn an average pay increase of 12% after the attack relative to CEOs at firms located far from attacks. CEOs at terrorist attack-proximate firms prefer cash-based compensation increases (e.g., salary and bonus) over equity-based compensation (e.g., options and stocks granted). The effect is causal and it is larger when the bargaining power of the CEO is high. Other executives and workers do not receive a terrorist attack premium.

We examine how the market values operating assets in the presence of time-varying ex ante risk that these assets may be tunneled away. We analyze pairs of Chinese publicly listed firms and their non-listed parents and examine the market valuation of current assets (cash balances, trade receivables, receivables due from the controlling shareholders, inventories) and fixed assets on the publicly listed firm's balance sheet. Our results show that in periods when the risk of tunneling from the publicly listed firm to its controlling shareholder increases, operating assets that are easy to tunnel (cash and receivables due from the controlling shareholder) are valued at larger discounts, while operating assets that are not easy to tunnel (trade receivables, inventories, fixed assets) are not valued at such discounts.