Research articles for the 2021-01-30
Stealth Acquisitions and Product Market Competition
SSRN
This study examines the extent to which firms structure their merger and acquisition (M&A) deals to avoid scrutiny from antitrust regulators in order to better understand how certain corporate deals alter firms’ competitive landscapes. We find that an abnormal number of M&A deals are structured to narrowly avoid antitrust scrutiny, and that these “stealth acquisitions†are driven by acquisitions of private targets that entail contractual terms with lower deal premiums that facilitate avoidance of antitrust review, payoff functions that allow for more discretion in assigning deal values, and additional compensation for managers of target firms (e.g., via post-acquisition employment). Finally, we find several patterns of evidence consistent with stealth acquisitions reducing product market competition, as the equity values of acquiring firms’ competitors increase following stealth acquisitions, and detailed micro-level product pricing data reveals increased product prices following a stealth acquisition by rivals. Our results suggest that firms can successfully manipulate M&A deals to avoid antitrust scrutiny, thereby leading to anticompetitive behavior.
SSRN
This study examines the extent to which firms structure their merger and acquisition (M&A) deals to avoid scrutiny from antitrust regulators in order to better understand how certain corporate deals alter firms’ competitive landscapes. We find that an abnormal number of M&A deals are structured to narrowly avoid antitrust scrutiny, and that these “stealth acquisitions†are driven by acquisitions of private targets that entail contractual terms with lower deal premiums that facilitate avoidance of antitrust review, payoff functions that allow for more discretion in assigning deal values, and additional compensation for managers of target firms (e.g., via post-acquisition employment). Finally, we find several patterns of evidence consistent with stealth acquisitions reducing product market competition, as the equity values of acquiring firms’ competitors increase following stealth acquisitions, and detailed micro-level product pricing data reveals increased product prices following a stealth acquisition by rivals. Our results suggest that firms can successfully manipulate M&A deals to avoid antitrust scrutiny, thereby leading to anticompetitive behavior.
Why Screening Is a 'Must Have' Tool for Effective Antitrust Compliance Programs
SSRN
Over the last decade, screens have had a significant impact on the early stages of litigation. Empirical evidence has helped shape complaints, motions to dismiss, court decisions, and agency investigations on collusion and manipulation matters. Yet to date they have played almost no role in corporate antitrust compliance programs. Why might this have been the case? Arguably the primary reason is that authorities did not, until very recently, offer meaningful consideration to corporations’ compliance programs when violations were found. Specifically with respect to screens, corporations were unwilling to spend any money to implement them, whether because they did not believe screens could be effective or whether it was just part of a general unwillingness to invest in compliance tools. We have long expected that the high penalties for cartels, the expansion of leniency programs, and the increased use of screening methods by competition authorities and private litigants would motivate corporations to enhance their antitrust compliance programs and incorporate screens as part of such improvements. Leniency is extended to the first to report a violation, so it naturally follows that it would be advantageous to be the first to detect violations. Antitrust compliance programs should play very important roles in detection and self-reporting, and also in deterrence, and screens should have had a major role within such programs, but to date this has not been the case. However, we expect this is about to change. The U.S. Department of Justice’s (“DOJâ€) recent change in policy towards compliance programs is likely to encourage meaningful investments in this area. The DOJ now offers formal incentives for “effective†compliance programs, directing prosecutors to evaluate in-place compliance programs as part of every corporate charge recommendation. Furthermore, throughout its evaluation, the Antitrust Division explicitly considers whether screens and statistical analyses are elements of the corporation’s antitrust compliance program.
SSRN
Over the last decade, screens have had a significant impact on the early stages of litigation. Empirical evidence has helped shape complaints, motions to dismiss, court decisions, and agency investigations on collusion and manipulation matters. Yet to date they have played almost no role in corporate antitrust compliance programs. Why might this have been the case? Arguably the primary reason is that authorities did not, until very recently, offer meaningful consideration to corporations’ compliance programs when violations were found. Specifically with respect to screens, corporations were unwilling to spend any money to implement them, whether because they did not believe screens could be effective or whether it was just part of a general unwillingness to invest in compliance tools. We have long expected that the high penalties for cartels, the expansion of leniency programs, and the increased use of screening methods by competition authorities and private litigants would motivate corporations to enhance their antitrust compliance programs and incorporate screens as part of such improvements. Leniency is extended to the first to report a violation, so it naturally follows that it would be advantageous to be the first to detect violations. Antitrust compliance programs should play very important roles in detection and self-reporting, and also in deterrence, and screens should have had a major role within such programs, but to date this has not been the case. However, we expect this is about to change. The U.S. Department of Justice’s (“DOJâ€) recent change in policy towards compliance programs is likely to encourage meaningful investments in this area. The DOJ now offers formal incentives for “effective†compliance programs, directing prosecutors to evaluate in-place compliance programs as part of every corporate charge recommendation. Furthermore, throughout its evaluation, the Antitrust Division explicitly considers whether screens and statistical analyses are elements of the corporation’s antitrust compliance program.
å"ªäº›èµ„产å¯ä»¥åº"ç"¨ CAPM 定价公å¼ï¼Ÿ(Which Assets Can Be Priced by CAPM Formula?)
SSRN
Chinese Abstract: CAPM å…¬å¼ç‰ä»·äºŽæŠ•èµ„者æŒæœ‰çš„风险è¯åˆ¸æœ€ä¼˜ç»„åˆæ˜¯å¸‚场组åˆã€‚CAPM å…¬å¼æ˜¯åŠå‡è¡¡å®šä»·ï¼Œæˆ'们求解出 CAPM å…¬å¼ä¸åŸºæœ¬è¯åˆ¸çš„ä»·æ ¼é€šè§£ã€‚ç»™å®šæŠ•èµ„è€…çš„ç¦€èµ‹å'Œå‡å€¼æ–¹å·®å好，æˆ'们找到 CAPM 市场的å‡è¡¡è§£ï¼Œæ示å‡è¡¡å®šä»·ä¸çš„æ•´ä½"æ€ç»´ã€‚通过ç†è®ºåˆ†æžï¼Œä»¥åŠæ™®é€šæ¬§å¼æœŸæƒè´Ÿä»·æ ¼çš„例å表明，CAPM å…¬å¼åªèƒ½ä¸ºå¯è¾¾çš„(市场æ"¯ä»˜ç©ºé—´å†…)èµ„äº§å®šä»·ï¼Œå› ä¸ºè´å¡"定价是基于基本è¯åˆ¸ä»·æ ¼ä¸ºå¸‚场ä¸çš„è¯åˆ¸ç»„åˆè¿›è¡Œçº¿æ€§å®šä»·ï¼Œæ˜¯èµ„产组åˆå¾‹çš„直接åº"ç"¨ã€‚å› æ¤ï¼ŒCAPM å…¬å¼çš„å„ç§åº"ç"¨ï¼Œéœ€è¦é‡æ–°å®¡è§†ã€‚English Abstract: The CAPM formula is equivalent to the optimal portfolio of risky securities held by any investor is the market portfolio. The CAPM formula is a semi-equilibrium pricing formula, and we discover the general solution for the prices of primitive securities in the CAPM formula. Given the investors’ endowments and mean-variance preferences, we find the equilibrium solution of the CAPM market, which reveals the overall thinking in equilibrium pricing. Through theoretical analysis and the example of the negative price of ordinary European options, we show that the CAPM formula can only price the assets that are reachable (within the market payoff space), because beta pricing is based on the prices of primitive securities to compute the linear pricing of the asset portfolio in the market. Which follows directly from the law of asset portfolio. Therefore, the various applications of the CAPM formula need to be reexamined.
SSRN
Chinese Abstract: CAPM å…¬å¼ç‰ä»·äºŽæŠ•èµ„者æŒæœ‰çš„风险è¯åˆ¸æœ€ä¼˜ç»„åˆæ˜¯å¸‚场组åˆã€‚CAPM å…¬å¼æ˜¯åŠå‡è¡¡å®šä»·ï¼Œæˆ'们求解出 CAPM å…¬å¼ä¸åŸºæœ¬è¯åˆ¸çš„ä»·æ ¼é€šè§£ã€‚ç»™å®šæŠ•èµ„è€…çš„ç¦€èµ‹å'Œå‡å€¼æ–¹å·®å好，æˆ'们找到 CAPM 市场的å‡è¡¡è§£ï¼Œæ示å‡è¡¡å®šä»·ä¸çš„æ•´ä½"æ€ç»´ã€‚通过ç†è®ºåˆ†æžï¼Œä»¥åŠæ™®é€šæ¬§å¼æœŸæƒè´Ÿä»·æ ¼çš„例å表明，CAPM å…¬å¼åªèƒ½ä¸ºå¯è¾¾çš„(市场æ"¯ä»˜ç©ºé—´å†…)èµ„äº§å®šä»·ï¼Œå› ä¸ºè´å¡"定价是基于基本è¯åˆ¸ä»·æ ¼ä¸ºå¸‚场ä¸çš„è¯åˆ¸ç»„åˆè¿›è¡Œçº¿æ€§å®šä»·ï¼Œæ˜¯èµ„产组åˆå¾‹çš„直接åº"ç"¨ã€‚å› æ¤ï¼ŒCAPM å…¬å¼çš„å„ç§åº"ç"¨ï¼Œéœ€è¦é‡æ–°å®¡è§†ã€‚English Abstract: The CAPM formula is equivalent to the optimal portfolio of risky securities held by any investor is the market portfolio. The CAPM formula is a semi-equilibrium pricing formula, and we discover the general solution for the prices of primitive securities in the CAPM formula. Given the investors’ endowments and mean-variance preferences, we find the equilibrium solution of the CAPM market, which reveals the overall thinking in equilibrium pricing. Through theoretical analysis and the example of the negative price of ordinary European options, we show that the CAPM formula can only price the assets that are reachable (within the market payoff space), because beta pricing is based on the prices of primitive securities to compute the linear pricing of the asset portfolio in the market. Which follows directly from the law of asset portfolio. Therefore, the various applications of the CAPM formula need to be reexamined.
市场组åˆå—投资者的å好å'Œè´¢å¯Œå½±å"å—？(Is the Market Portfolio Affected by Individual Investor’s Preference and Wealth?)
SSRN
Chinese Abstract: 如果æ¯ä¸ªæŠ•èµ„者投入市场组åˆçš„é‡'é¢å¢žåŠ 一å€ï¼Œé‚£ä¹ˆå¸‚场组åˆçš„æ€»å¸‚å€¼å°†å¢žåŠ ä¸€å€ã€‚æ¤æ—¶ï¼Œå¸‚场组åˆçš„æƒé‡ä»ç„¶ä¿æŒä¸å˜å—？ç"案是å¦å®šçš„，作为åŠå‡è¡¡å®šä»·çš„ CAPM å…¬å¼å°±æ示了æ¯ç§åŸºæœ¬è¯åˆ¸çš„市值通常并éžåŒæ¯"ä¾‹å¢žåŠ ä¸€å€ã€‚进一æ¥åœ°ï¼ŒCAPM çš„å‡è¡¡è§£å±•ç¤ºäº†å¸‚场组åˆæƒé‡ä¸ŽæŠ•èµ„者å好å'Œè´¢å¯Œä¹‹é—´çš„è"系，æˆ'们能容æ˜"地判别市场组åˆä¸å„基本è¯åˆ¸æƒé‡å—投资者å好å'Œè´¢å¯Œå½±å"çš„æ£è´Ÿæ€§ã€‚English Abstract: If the amount invested by each investor in the market portfolio doubles, the total market value of the market portfolio will double. At this time, do the weights of the market portfolio remain unchanged? The answer is No. The CAPM formula, which is a semi-equilibrium pricing formula, reveals that the market value of each primitive security usually does not double in the same proportion. Furthermore, the closed-form solution to CAPM equilibrium reveals the relationship between the weights of market portfolio and the preference and wealth of each investor. Thus, we can easily find the positive or negative effects of each investor’s preference and wealth on the weight of each primitive security in the market portfolio.
SSRN
Chinese Abstract: 如果æ¯ä¸ªæŠ•èµ„者投入市场组åˆçš„é‡'é¢å¢žåŠ 一å€ï¼Œé‚£ä¹ˆå¸‚场组åˆçš„æ€»å¸‚å€¼å°†å¢žåŠ ä¸€å€ã€‚æ¤æ—¶ï¼Œå¸‚场组åˆçš„æƒé‡ä»ç„¶ä¿æŒä¸å˜å—？ç"案是å¦å®šçš„，作为åŠå‡è¡¡å®šä»·çš„ CAPM å…¬å¼å°±æ示了æ¯ç§åŸºæœ¬è¯åˆ¸çš„市值通常并éžåŒæ¯"ä¾‹å¢žåŠ ä¸€å€ã€‚进一æ¥åœ°ï¼ŒCAPM çš„å‡è¡¡è§£å±•ç¤ºäº†å¸‚场组åˆæƒé‡ä¸ŽæŠ•èµ„者å好å'Œè´¢å¯Œä¹‹é—´çš„è"系，æˆ'们能容æ˜"地判别市场组åˆä¸å„基本è¯åˆ¸æƒé‡å—投资者å好å'Œè´¢å¯Œå½±å"çš„æ£è´Ÿæ€§ã€‚English Abstract: If the amount invested by each investor in the market portfolio doubles, the total market value of the market portfolio will double. At this time, do the weights of the market portfolio remain unchanged? The answer is No. The CAPM formula, which is a semi-equilibrium pricing formula, reveals that the market value of each primitive security usually does not double in the same proportion. Furthermore, the closed-form solution to CAPM equilibrium reveals the relationship between the weights of market portfolio and the preference and wealth of each investor. Thus, we can easily find the positive or negative effects of each investor’s preference and wealth on the weight of each primitive security in the market portfolio.
è´å¡"与系统风险 (Beta and Systematic Risk)
SSRN
Chinese Abstract: CAPM å…¬å¼è¢«è§£é‡Šä¸ºé£Žé™©ä¸ŽæœŸæœ›æ"¶ç›ŠçŽ‡çš„关系，è´å¡"代表系统风险，决定基本è¯åˆ¸çš„风险溢价。基于 CAPM 市场å‡è¡¡çš„解æžè§£ï¼Œæˆ'们看到基本è¯åˆ¸çš„期望æ"¶ç›ŠçŽ‡å'Œè´å¡"都是内ç"Ÿçš„，都ç"±åŸºæœ¬è¯åˆ¸çš„æ"¯ä»˜ä»¥åŠæŠ•èµ„者的禀赋å'Œå好ç‰å¸‚场基本设定共åŒå†³å®šã€‚å½" CAPM å‡è¡¡å˜åœ¨å¥—利机会时，ç"¨è´å¡"进行定价是没有æ„义的。从å‡è¡¡å®šä»·çš„è§'度，æˆ'们看到风险教æ¡çš„é"™è¯¯æœ‰ï¼šæŠŠå•ä¸ªè¯åˆ¸çš„定价从整ä½"ä¸å‰²è£‚出æ¥ï¼ŒæŠŠå¸‚场组åˆå½"æˆæ˜¯å¤–ç"Ÿçš„，以åŠé€»è¾'上å˜åœ¨å¾ªçŽ¯è®ºè¯ã€‚English Abstract: The CAPM formula is interpreted as the relationship between risk and expected rate of return, where beta measures systematic risk and determines the risk premium of given primitive security. Based on the analytical solution of the CAPM market equilibrium, we see that the expected rate of return and beta of any primitive security are both endogenous, and they are both determined by the basic market settings, such as the payoffs of primitive securities and the investors’ endowment and preference. When there are arbitrage opportunities in the CAPM equilibrium, it is meaningless to use beta for pricing. From the perspective of equilibrium pricing, we see that the mistakes of the pricing by risk dogma are: the pricing of an individual security is separated from the whole portfolio, the market portfolio is regarded as exogenous, and the logical circularity built into the risk dogma.
SSRN
Chinese Abstract: CAPM å…¬å¼è¢«è§£é‡Šä¸ºé£Žé™©ä¸ŽæœŸæœ›æ"¶ç›ŠçŽ‡çš„关系，è´å¡"代表系统风险，决定基本è¯åˆ¸çš„风险溢价。基于 CAPM 市场å‡è¡¡çš„解æžè§£ï¼Œæˆ'们看到基本è¯åˆ¸çš„期望æ"¶ç›ŠçŽ‡å'Œè´å¡"都是内ç"Ÿçš„，都ç"±åŸºæœ¬è¯åˆ¸çš„æ"¯ä»˜ä»¥åŠæŠ•èµ„者的禀赋å'Œå好ç‰å¸‚场基本设定共åŒå†³å®šã€‚å½" CAPM å‡è¡¡å˜åœ¨å¥—利机会时，ç"¨è´å¡"进行定价是没有æ„义的。从å‡è¡¡å®šä»·çš„è§'度，æˆ'们看到风险教æ¡çš„é"™è¯¯æœ‰ï¼šæŠŠå•ä¸ªè¯åˆ¸çš„定价从整ä½"ä¸å‰²è£‚出æ¥ï¼ŒæŠŠå¸‚场组åˆå½"æˆæ˜¯å¤–ç"Ÿçš„，以åŠé€»è¾'上å˜åœ¨å¾ªçŽ¯è®ºè¯ã€‚English Abstract: The CAPM formula is interpreted as the relationship between risk and expected rate of return, where beta measures systematic risk and determines the risk premium of given primitive security. Based on the analytical solution of the CAPM market equilibrium, we see that the expected rate of return and beta of any primitive security are both endogenous, and they are both determined by the basic market settings, such as the payoffs of primitive securities and the investors’ endowment and preference. When there are arbitrage opportunities in the CAPM equilibrium, it is meaningless to use beta for pricing. From the perspective of equilibrium pricing, we see that the mistakes of the pricing by risk dogma are: the pricing of an individual security is separated from the whole portfolio, the market portfolio is regarded as exogenous, and the logical circularity built into the risk dogma.
