Working Papers

Demographics and Innovation

with Ambrus Kesckés and Phuong-Anh Nguyen

We argue that a younger labor force produces more innovation. Using the native born labor force projected based on historical births, we find that a younger age structure causes a significant increase in innovation. We use three levels of analysis in succession – commuting zones, firms, and inventors – to examine or eliminate various effects such as firm and inventor life cycles. We also find that innovation activities reflect the innovative characteristics of younger labor forces. Our results indicate that demographics increase innovation through the labor supply channel rather than through a financing supply or consumer demand channel.


The negative Effects of Mergers and Acquisitions on the Value of Rivals

with Laurent Frésard, Victoria Slabik, and Philip Valta

Average stock price reactions of industry rivals in horizontal U.S. mergers and acquisitions around deal announcements are robustly negative. This finding is in contrast to the results in the existing literature, which focuses on smaller samples of deals involving mostly publicly listed firms. Rivals’ returns are more negative in growing and concentrated industries. Moreover, the negative rivals’ stock price reactions are related to future decreases in operating performance, increased probability of bankruptcy and challenges by antitrust authorities, and increased probability of rivals’ future acquisitions. Overall, these results suggest that M&As have strong competitive effects for the rivals of target companies.


The Unintended Consequences of Regulations in Emerging Financial Market: Evidence from the Chinese IPO Market

with Xiaohui Wu, Qi Zeng, and Yan Zhang

This paper explores the impact of regulations imposed by Chinese authorities on the development of the Chinese IPO market. Because of limits on prices and proceeds, the Chinese IPO market does not attract companies that need cash the most. Some regulations exclude firms from the domestic IPO market. Others induce firms with large growth options to list abroad. Some IPO firms that raise large amounts of cash decide to pay large dividends shortly after going public. Investors interpret this behaviour as evidence that they overestimated the growth options of these firms at the time of their IPO and react accordingly.


Do Analysts’ Preferences Affect Corporate Policies?

with François Degeorge, Ambrus Kecskes, and Sébastien Michenaud

Equity research analysts tend to cover firms about which they have favorable views. We exploit this tendency to infer analysts’ preferences for corporate policies from their coverage decisions. We then use exogenous analyst disappearances to examine the effect of these preferences on corporate policies. After an analyst disappears, firms change their policies in the direction opposite to the analyst’s preferences. The influence of analyst preferences on policies is stronger for firms for which analyst coverage is likely to matter more: young firms, and firms with higher market valuations. Our results suggest that firms choose their corporate policies, in part, to be consistent with the preferences of their analysts.