The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Search results: 5.
Corporate Reorganizations and Non‐Cash Auctions
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00269
Matthew Rhodes‐Kropf, S. Viswanathan
This paper extends the theory of non‐cash auctions by considering the revenue and efficiency of using different securities. Research on bankruptcy and privatization suggests using non‐cash auctions to increase cash‐constrained bidder participation. We examine this proposal and demonstrate that securities may lead to higher revenue. However, bidders pool unless bids include debt, which results in possible repossession by the seller. This suggests all‐equity outcomes are unlikely and explains the high debt of reorganized firms. Securities also inefficiently determine bidders' incentive contracts and the firm's capital structure. Therefore, we recommend a new cash auction for an incentive contract.
Market Valuation and Merger Waves
Published: 11/27/2005 | DOI: 10.1111/j.1540-6261.2004.00713.x
MATTHEW RHODES‐KROPF, S. VISWANATHAN
Does valuation affect mergers? Data suggest that periods of stock merger activity are correlated with high market valuations. The naïve explanation that overvalued bidders wish to use stock is incomplete because targets should not be eager to accept stock. However, we show that potential market value deviations from fundamental values on both sides of the transaction can rationally lead to a correlation between stock merger activity and market valuation. Merger waves and waves of cash and stock purchases can be rationally driven by periods of over‐ and undervaluation of the stock market. Thus, valuation fundamentally impacts mergers.
Concentrating on Governance
Published: 09/21/2011 | DOI: 10.1111/j.1540-6261.2011.01684.x
DALIDA KADYRZHANOVA, MATTHEW RHODES‐KROPF
This paper develops a novel trade‐off view of corporate governance. Using a model that integrates agency costs and bargaining benefits of management‐friendly provisions, we identify the economic determinants of the resulting trade‐offs for shareholder value. Consistent with the theory, our empirical analysis shows that provisions that allow managers to delay takeovers have significant bargaining effects and a positive relation with shareholder value in concentrated industries. By contrast, non‐delay provisions have an unambiguously negative relation with value, particularly in concentrated industries. Our analysis suggests that there are governance trade‐offs for shareholders and that industry concentration is an important determinant of their severity.
Is a VC Partnership Greater Than the Sum of Its Partners?
Published: 02/06/2015 | DOI: 10.1111/jofi.12249
MICHAEL EWENS, MATTHEW RHODES‐KROPF
This paper investigates whether individual venture capitalists have repeatable investment skill and the extent to which their skill is impacted by the venture capital (VC) firm where they work. We examine a unique data set that tracks the performance of individual venture capitalists' investments over time and as they move between firms. We find evidence of skill and exit style differences even among venture partners investing at the same VC firm at the same time. Furthermore, our estimates suggest the partners' human capital is two to five times more important than the VC firm's organizational capital in explaining performance.
The Market for Mergers and the Boundaries of the Firm
Published: 05/09/2008 | DOI: 10.1111/j.1540-6261.2008.01355.x
MATTHEW RHODES‐KROPF, DAVID T. ROBINSON
We relate the property rights theory of the firm to empirical regularities in the market for mergers and acquisitions. We first show that high market‐to‐book acquirers typically do not purchase low market‐to‐book targets. Instead, mergers pair together firms with similar ratios. We then build a continuous‐time model of investment and merger activity combining search, scarcity, and asset complementarity to explain this like buys like result. We test the model by relating like‐buys‐like to search frictions. Search frictions and assortative matching vary inversely, supporting the model over standard explanations.