Asymmetric information and target firm returns

This article examines the relationship between asymmetric information and target firm returns in mergers and acquisitions (M&As). We argue that if managers possess favourable (unfavourable) asymmetric information, they will offer, ceteris paribus, a high (low) premium, affecting target firm returns accordingly. We propose several proxies of asymmetric information. The empirical evidence strongly supports our hypothesis as we find that target firm returns are significantly negatively related to asymmetric information regarding synergy gains. Our results are robust after controlling for several target and deal characteristics.     

Daily diaries in time use surveys. A solution to overcome measurement problems in single-activity events with long characteristic rhythms

Daily diaries are a widely used measurement tool in studies on the use of social time. However, while their high level of accuracy is supported by a lot of research, scholars often voice doubts regarding the validity of the estimates obtained if the characteristic rhythm of the events in question is not completed within a 24-h period. This study attempts to explain why, although these statistics are not wrong, they need to be understood correctly before proceeding with research based on them. To overcome the problem we will propose a solution for new surveys where use of diaries of this type is scheduled. Although this solution is not without limitations, they are much less restrictive than those imposed by traditional daily diaries.     

Corporate Raiders,Performance and Governance in Europe

I analyse 136 block purchases made by corporate raiders in Europe between 1990 and 2001. Contrary to the hypothesis that these investors expropriate the target companies, there is a positive market reaction to the first public announcement of these purchases. In the long‐run, raiders earn an abnormal profit when they sell their stakes. When they still held their positions at the end of the sample period, abnormal returns were insignificant. Raiders' activities do not improve operating performance. The findings are consistent with superior stock picking ability among these investors, but do not support the hypothesis that raiders are governance champions.     

The Link between Institutional and Economic Integration: Insights for Latin America from the European Experience

The European experience illustrates that institutional integration interacts with economic integration at the regional level. In this paper we ask how economic and institutional integration are linked and whether there is a causal link between the two. We present an original indicator of institutional integration and study how it developed vis-à-vis diverse measures of economic integration. In particular, we ask what insights can be drawn from the European process of regional integration, which started in the 1950s, for regional integration in Latin America today. We find that Latin America is currently less economically integrated not only than the European Union today, but for certain economic variables even than the European Union in the 1960s. A VAR analysis illustrates that the link between institutional and economic integration has worked both ways throughout the European experience. There is also evidence that stronger institutional integration has indeed led to deeper economic integration.     

Price discrimination and efficient matching

This paper considers the problem of a monopoly matchmaker that uses a schedule of entrance fees to sort different types of agents on the two sides of a matching market into exclusive meeting places, where agents randomly form pairwise matches. We make the standard assumption that the match value function exhibits complementarities, so that matching types at equal percentiles maximizes total match value and is efficient. We provide necessary conditions and sufficient conditions for the revenue-maximizing sorting to be efficient. These conditions require the match value function, modified to incorporate the incentive cost of eliciting private type information, to exhibit complementarities in types.JEL Clalssification Numbers C7, D4We thank Jonathan Levin, Tracy Lewis, and the seminar audience at University of California at Los Angeles, University of British Columbia, Duke University, and 2003 Econometric Society North American Summer Meeting for comments and suggestions. We are also grateful for helpful suggestions from the referees and the Editor     

Optimal proportional reinsurance from the point of view of cedent and reinsurer

In the reinsurance market, the cedent and the reinsurer make their subjective evaluations of the utility and riskiness of the financial operations covered by a treaty by deriving preference rankings of the different kinds of agreements. If both the cedent and the reinsurer evaluate the operation underlying the treaty by means of their utility functions and adopt the criterion based on the comparison between the expected utilities in order to take into account the subjective attitude toward risk, then the indifference prices play a crucial role because they define the preference thresholds of the exchange, thus restricting the range of variability of the reinsurance price. By using an analytical approach, this paper examines the above problem identifying the margins for achieving Pareto-optimal solutions in trading insurance risks.     

Family Control and Financing Decisions

This study uses a comprehensive European dataset to investigate the role of family control in corporate financing decisions during the period 1998–2008. We find that family firms have a preference for debt financing, a non‐control‐diluting security, and are more reluctant than non‐family firms to raise capital through equity offerings. We also find that credit markets are prone to provide long‐term debt to family firms, indicating that they view their investment decisions as less risky. In fact, our empirical results demonstrate that family firms invest less than non‐family firms in high‐risk, research and development (R&D) projects, but not in low‐risk, fixed‐asset capital expenditure (CAPEX) projects, suggesting that fear of control loss in family firms deters risk‐taking. Overall, our findings reveal that the external financing (and investment) decisions of family firms are in greater (lesser) conflict with the interests of minority shareholders (bondholders).     

Unravelling of Dynamic Sorting

We consider a two-sided, finite-horizon search and matching model with heterogeneous types and complementarity between types. The quality of the pool of potential partners deteriorates as agents who have found mutually agreeable matches exit the market. When search is costless and all agents participate in each matching round, the market performs a sorting function in that high types of agents have multiple chances to match with their peers. However, this sorting function is lost if agents incur an arbitrarily small cost in order to participate in each round. With a sufficiently rich type space, the market unravels as almost all agents rush to participate in the first round and match and exit with anyone they meet.     

The regime for circulation of judgements under the EC regulation on insolvency proceedings

The regime for recognition and enforcement of judgements under the EC Regulation 1346/00 on insolvency proceedings raises several issues due to gaps in its provisions (Chapter II). This article analyses these rules and suggests solutions to its principal shortcomings particularly focusing on the prohibition against reviewing decisions as to their merits and conflicts between judgements opening main insolvency proceedings in different member states. This analysis draws on the European Court of Justice's interpretation of the 1968 Brussels Convention in preliminary rulings, which is a valuable tool for dealing with problems concerning recognition and enforcement of judgements as the Regulation is based on a similar framework. Copyright © 2006 John Wiley & Sons, Ltd.