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Disclosures about key value drivers in M&A announcement press releases: An exploratory study
No full textWe investigate the association between disclosures about key value drivers (i.e., growth, synergies, human capital, brands, customers and technology) in press releases announcing mergers and acquisitions (M&A) deals and acquirer stock returns upon the announcement. We find that, after controlling for the main characteristics of the deal, acquirers that use more terms about these value drivers in press releases exhibit more negative market returns around the M&A announcement. An increase of 10% in the number of terms used about generic value drivers is associated with a decrease in announcement market-adjusted returns of approximately 43 basis points. The negative association between terms about value drivers and acquirer stock returns is stronger for larger deals. We also find that disclosures about these value drivers in M&A announcement press releases are consistent with the subsequent subjective valuation of intangible assets recognized in acquirers’ financial statements through the purchase price allocation. Our findings are relevant for investors attempting to interpret early signals about the performance of M&As and for managers communicating about these strategic investment decisions
Eliciting Multiple Prior Beliefs
No full textDespite the increasing importance of multiple priors in various domains of economics and the significant theoretical advances concerning them, choice-based incentive-compatible multiple-prior elicitation largely remains an open problem. This paper develops a solution, comprising a preference-based identification of a subject’s probability interval for an event, and two procedures for eliciting it. The method does not rely on specific assumptions about subjects’ ambiguity attitudes or probabilistic sophistication. To demonstrate its feasibility, we implement it in two incentivized experiments to elicit the multiple-prior equivalent of subjects’ cumulative distribution functions over continuous-valued sources of uncertainty. We find a predominance of non-degenerate probability intervals among subjects for all explored sources, with intervals being wider for less familiar sources. Finally, we use our method to undertake the first elicitation of the mixture coefficient in the Hurwicz α-maxmin EU model that fully controls for beliefs
The Fairness of Credit Scoring Models
No full textIn credit markets, screening algorithms discriminate between good-type and bad-type borrowers. This is their raison d’être. However, by doing so, they also often discriminate between individuals sharing a protected attribute (e.g. gender, age, race) and the rest of the population. In this paper, we show how to test (1) whether there exists a statistical significant difference in terms of rejection rates or interest rates, called lack of fairness, between protected and unprotected groups and (2) whether this difference is only due to credit worthiness. When condition (2) is not met, the screening algorithm does not comply with the fair-lending principle and can be qualified as illegal. Our framework provides guidance on how algorithmic fairness can be monitored by lenders, controlled by their regulators, and improved for the benefit of protected groups
Le contrôle de gestion et le management à la lumière de Jean Piaget
No full textXerfi Canal spoke to Hélène Löning, professor at HEC Paris, about management control tools.The interview was conducted by Jean-Philippe Denis.Xerfi Canal a reçu Hélène Löning, professeure à HEC Paris, pour parler des outils de contrôle de gestion.Une interview menée par Jean-Philippe Denis
Market Power and Credit Rating Standards: Global Evidence
No full textWe examine how the market power of credit rating agencies (CRAs) affects their rating standards. Using a global sample across 26 countries from 1994 to 2019, we find that greater market power of global CRAs, measured by their country-level market shares, is associated with stricter corporate ratings. In addition, the increase in global CRAs’ market shares contributes to the tightening trend in their credit ratings worldwide. Exploiting the NRSRO designation of local CRAs in Japan, we find that global CRAs issue more inflated ratings following a decline in their market power. Further, global CRAs’ greater market power is associated with timelier ratings, fewer missed defaults, but more false warnings. Collectively, our findings suggest that global rating agencies’ market power leads to stricter rating standards and timelier ratings by strengthening the agencies’ reputation concerns, but at the expense of increased false warnings
What Matters in a Characteristic?
No full textWe investigate how different components in firm characteristics affect expected returns and comovements in international stock markets. We decompose characteristics into country, industry, and adjusted components. Then, we use these components to capture time-series and cross-sectional variations in stock-level alphas and factor exposures. We show that decomposing characteristics is crucial to model jointly expected returns and comovements: (i) country (adjusted) components capture systematic risk exposures (alphas), (ii) component-based models outperform benchmark models, and (iii) alphas in international markets are significant, contrary to the U.S. market. However, trading on predicted alphas does not generate significant out-of-sample net performances, indicating that they are related to limits to arbitrage
Du BoP dans le beat , une analyse des transformations numériques dans la musique
No full textInternational audienceIn a struggling music market, the digital distributor Believe has grown to the point of competing with the Majors in the industry. This article analyzes its singular strategic choices, to draw lessons on digital mutations. The extension of Believe to artists excluded from the industry leads us to call upon the “Bottom of the Pyramid” literature. We show that this choice is at the origin of a model that breaks the traditional boundaries of the industry by mixing technical services for the greatest number of people and support for selected artists.Dans un marché de la musique morne, le distributeur numérique Believe s’est développé au point de concurrencer les majors du secteur. Cet article analyse ses choix stratégiques singuliers pour en tirer des enseignements sur les mutations numériques. L’ouverture de Believe à des artistes exclus de l’industrie conduit les auteurs à mobiliser la littérature « bas de la pyramide ». Ils montrent que ce choix est à l’origine d’un modèle qui casse les frontières traditionnelles de l’industrie en mêlant prestation technique pour le plus grand nombre et accompagnement d’artistes sélectionnés
Strategic Communication with Decoder Side Information
No full textInternational audienceThe strategic communication problem consists of a joint source-channel coding problem in which the encoder and the decoder optimize two arbitrary distinct distortion functions. This problem lies on the bridge between Information Theory and Game Theory. As in the persuasion game of Kamenica and Gentzkow, we consider that the encoder commits to an encoding strategy, then the decoder selects the optimal output symbol based on its Bayesian posterior belief. The informational content of the source affects differently the two distinct distortion functions, therefore each symbol is encoded in a specific way. In this work, we consider that the decoder has side information. Accordingly, we reformulate the Bayesian update of the decoder posterior beliefs and the optimal information disclosure policy of the encoder. We provide four different expressions of the solution, in terms of the expected encoder distortion optimized under an information constraint, and it in terms of convex closures of auxiliary distortion functions. We compute the encoder optimal distortion for the doubly symmetric binary source example
Evaluating Ambiguous Offerings
No full textThis paper studies how audience members categorize and evaluate ambiguous offerings. Depending on whether audience members categorize ambiguous offerings based on prototypes or goals, they activate two distinct cognitive mechanisms and evaluate differently ambiguous offerings. We expect that when audiences engage in goal-based vs. prototype-based categorization, their evaluation of ambiguous products increases. We theorize that under goal-based categorization, the perceived utility of unclear attributes increases for audiences, which leads them to evaluate more positively ambiguous product offerings. We test and find support for these direct and mediated relationships through a series of lab, on-line and field experiments. Overall, this study offers important implications for research on product and market categories, optimal distinctiveness, and market agents’ cognitive ascription of value