The Choice of Sale Method and its Consequences in Mergers and Acquisitions
2017, Quarterly Review of Economics and Finance, 63, 170-184, with Inga Chira,
Presented at the Financial Management Association Meeting 2015 and the Eastern Finance Association Meeting 2015
We examine the method by which firms are sold, auctions or one-on-one negotiations. We define and describe a subset of transactions that result from auction failure (i.e., target-attempted auctions that secure only one bidder). Controlling for endogeneity, firm, and transaction specific characteristics, we show that attempted auctions that resulted in one-on-one negotiations are associated with lower final premiums and higher acquirer returns compared with both successful auctions and pure negotiations (negotiations with only one bidder from the outset to the conclusion of the transaction). We find that several target, acquirer, and deal-specific characteristics affect the likelihood of auction failure. The loss of latent (perceived) competition that results from an unsuccessful attempt to auction the target partially shifts the wealth created by a merger or acquisition from targets’ to acquirers’ shareholders. To maximize shareholders’ wealth, targets should carefully consider the likelihood of securing more than one interested bidder prior to initiating an auction.
Oil Price Shocks and Exchange Rate Movements
2016, Global Finance Journal, 31, 18-30, with Ky-Hyang Yuhn
Presented at the Midwestern Finance Association Meeting 2013 and the Southern Finance Association Meeting 2013
This study investigates the effects of oil price shocks on exchange rate movements in five major oil-exporting countries (Russia, Brazil, Mexico, Canada, and Norway) using monthly data from September 1998 to August 2012. There are noticeable differences in the behavior of the exchange rate between emerging markets and advanced economies. Russia and Brazil in particular exhibit different patterns from those of Canada and Norway in the direction and magnitude of the effects of oil price shocks on exchange rate movements. The R2 for Russia and Brazil is more than doubled when oil prices are incorporated into the fundamental model, but it increases only slightly for Canada and Norway. The volatility of exchange rates associated with an oil price shock is significant in Russia, Brazil, and Mexico, but weak in Norway and Canada. It takes much longer for the exchange rate of Russia, Brazil, and Mexico to reach the initial equilibrium level than for the exchange rate of Norway and Canada. The asymmetric behavior of exchange rate volatility among countries seems to be related to the efficiency of financial and foreign exchange markets rather than to the importance of oil revenues in an economy.
Who is successful on the Finance Ph.D. job market?
2016, Journal of Corporate Finance, 37, 109-131, with Inga Chira and Arjan Premti
Presented at the Midwestern Finance Association Meeting 2016
We examine the attributes that contribute to a successful placement of first time finance Ph.D. job market participants. The results of a survey of 237 former job market candidates suggest that while the ranking of the Ph.D.-granting institution plays a significant role in candidates’ success at all stages of the job market (candidates from higher ranked schools receive more conference interviews, fly-outs, job offers, and secure higher salaries), other factors also contribute. Prior publications or invitations to resubmit a paper to a journal, experience of presenting at academic conferences, and prior work experience positively affect marketability. Younger candidates, Caucasians, and graduates of higher ranked schools secure placements with higher research requirements and higher salaries. The quality of the hiring institution plays a central role in the candidate’s overall satisfaction with the job market outcome. Additionally, we collect and summarize recommendations of survey respondents to future first-time job market participants.
Corporate Diversification and Firm Value during Economic Downturns
2015, Quarterly Review of Economics and Finance, 55, 160-175, with Garrett Smith
Presented at the Eastern Finance Association Annual Meeting 2014
This paper examines the effect of corporate diversification on firm value during periods of economic downturns. Analysis of diversified firms’ valuation during recessionary periods reveals a significant increase in relative value of diversified firms. The observed improvement in the relative valuation is only a temporary phenomenon, which disappears in the four quarters following the trough of the recession. We do not find support to the hypothesis that the improvement in relative valuation of diversified firms during economic downturns is attributed to the ability of diversified firms to utilize broader external capital markets. We demonstrate that the improvement in relative valuation is largely driven by diversified firms that are financially constrained, and, therefore, attribute the observed improvement to more efficient internal capital allocation during recessions.
Mutual Funds as an Investment Vehicle for the Middle Class
2016, The American Middle Class: An Economic Encyclopedia of Progress and Poverty, with Anna Agapova, edited by Robert S. Rycroft
The chapter introduces the history and the basic principles of investing in mutual funds. It discusses the role of mutual funds in the growth of the U.S. middle class.
Tax-Induced Trading: the Effect of Capital Gain Tax Changes
with Anna Agapova, submitted
Presented at the Financial Management Association Meeting 2015 and the Academy of Financial Service Meeting 2016
Prospect theory suggests that people perceive economic losses and gains differently. We apply the theory to examine the effect of confirmed and tentative changes in capital gain taxes on tax-induced trading. Investors adjust their trading in response to tax changes: They reduce trading of winners more than increase trading of losers in the event of a tax decrease (and vice versa in the event of a tax increase) and treat tentative tax increase similar to a confirmed one. These findings have important policy implications: Uncertainty about impending tax rate changes alters investors’ trading behavior and may affect government tax collections.
Disclosure of strategic information
with Anna Agapova, submitted
Presented at the Financial Management Association (FMA) Doctoral Student Consortium 2014, the Special Doctoral Student Paper Session at the FMA 2014, and the Eastern Finance Association Annual Meeting 2016
We empirically investigate corporate management’s decision to voluntarily disclose information that pertains to firm’s strategy. A tradeoff between the benefit of reduced information asymmetry and the cost of investors’ disagreement with the strategy, along with the firm’s intrinsic value define the likelihood of strategic information disclosure. We show that a higher level of information asymmetry and a higher degree of investor-management disagreement increase the likelihood of disclosure of strategic information. Firms with higher intrinsic value are less likely to disclose strategic information. The results are robust to the use of exogenous shocks to investor-management disagreement and information asymmetry.
Bond ETFs and Price Volatility of Underlying Securities
with Anna Agapova
this paper received a 10,000 euro grant from the ETF Research Academy sponsored by Luxor Asset Management
Presented at the Eastern Finance Association Annual Meeting 2017 and the [I] Luxor Asset Management Investor Summit in Munich, Germany, 2017
Investors may prefer buying ETFs over making direct investments in illiquid securities, e.g. bonds, as ETFs can provide insurance, diversification and a cheaper and easier way of investing in such assets. However, volatility of demand for bond ETFs (or any other illiquid assets’ ETFs) may distort prices and raise price volatility of underlying securities. Therefore, investors face a tradeoff between investing in bond securities through ETFs or directly in bonds not associated with ETFs. We find that constituents of corporate bond ETFs have lower return levels and return volatilities than bonds not held by ETFs. This can be explained by improved liquidity of the bonds held by ETFs due to the price discovery function provided by the ETF market. However, this result is driven by lower credit quality bonds, which benefit disproportionately from the ETF price discovery mechanism. Investment grade bonds which have little to gain through price discovery actually experience an increase in volatility due to inclusion in ETFs.
Assessing Economic Damages in Personal Injury and Wrongful Death Litigation: The State of South Carolina
Paper for the special state series in the Journal of Forensic Economics
Paper discusses the laws, cases, and the methodology of economic loss assessment for personal injury and wrongful death cases in the state of South Carolina.
Corporate governance, strategic information disclosure, and the disclosure bonus
with Anna Agapova
We empirically investigate the relation between the quality of corporate governance and the propensity of the firm to disclose strategic information. Using a hand-collected data set, we demonstrate that companies with lower managerial entrenchment (better contractual bonding mechanism of corporate governance) are less likely to disclose strategic information. Firms that enjoy better monitoring through higher board independence and better quality auditors possess a higher propensity to provide strategic guidance. Furthermore, we investigate the link between the level and the structure of executive compensation and strategic information disclosure. Empirical results suggest an existence of a “disclosure bonus” that is paid to executives following strategic information disclosure. The bonus reflects in both the salary and the equity-related component of executive compensation.
Information Leakage of ADRs Prior to Company Issued Guidance
with Anna Agapova and Jeff Madura
We examine whether the degree of selective disclosure (as measured by information leakage prior to managerial guidance) of foreign firms with ADRs is different from that of U.S. firms. We find that there is no variation of leakage before earning guidance between ADRs and U.S. firms. This result is consistent with a prediction that despite being exempt from Regulation FD, ADRs have sufficient incentives to avoid selective disclosure even without enforcement by the regulation. In addition, we attempt to determine whether the variation in selective disclosure among the foreign firms with ADRs is conditioned on the respective home country transparency and governance standards. We find that country specific characteristics do not explain the variation in information leakage of ADRs.
Degree of Diversification and Stock Returns: An Empirical Test
with Garrett Smith
We expand on the work of Fama and French (1992), Fama and French (1993) and propose that the degree of corporate diversification should contribute to the understanding of risk factors for asset returns. First, we demonstrate that inclusion of firm-specific degree of diversification aids in explaining the cross-sectional variation of stock returns. Second, we develop a diversification-based pricing factor, NMH (non-diversified minus highly diversified) and empirically test its significance in the time-series of stock returns. The findings of this paper contribute to establishing a link between macroeconomic variables and stock returns.
FIN 645 (Mercer), FIN 6936 (FAU)
The focus of this course is on modeling, forecasting, and planning corporate financial decisions. The course is designed for students planning careers involving valuation and forecasting in corporate finance, private equity, venture capital, Treasury Management and mergers and acquisitions among others. We will link the theory of finance to practical and usable spreadsheet models that will assist a financial manager in forecasting, valuation, firm’s investment and capital structure decisions. Students will also be introduced to both simulation and optimization.
International Economics and Finance
FIN 444 (Mercer)
This course provides the student with an introduction to financial analysis in the international context by focusing on those areas of decision-making unique to the firm operating in the global economy. The topics of interest in International Financial Management include the following: The global environment for the multinational business; foreign exchange markets; international financial markets and portfolio considerations; direct foreign investment and multinational capital budgeting; and the mechanics of exposure management and exchange rate forecasting.
Principles of Financial Management
FIN 362 (Mercer), FIN 3403 (FAU)
This is an introductory survey to the fundamental principles of corporate financial management. Normative analysis of investment and financing decisions of a corporation are provided. In addition, issues concerning the management of working capital and financial planning are addressed.
FIN 404 (Mercer), FIN 4504 (FAU)
The course provides an in-depth discussion of fundamental principles related to investment securities and options for both institutional and individual investors. These principal ideas may include: fixed-income securities analysis, risk-return analysis, portfolio selection, asset pricing, equity securities analysis, the efficient market hypothesis, and derivatives analysis and pricing.
Mergers and Acquisitions
BA 671 (Mercer), MAN 6931 (FAU)
This course will provide an introduction and an overview of mergers and acquisitions (M&A) and other restructuring activities. Some of the topics to be covered in this course include: M&A environment, regulatory environment, corporate takeover market, M&A valuation and modeling, alternative business and restructuring strategies and financing M&A deals.
I provide economic loss assessments for personal injury, medical malpractice, wrongful death, and employment discrimination cases.
I recently developed a software that automates the initial calculation of economic damages in personal injury and malpractice cases. The software allows for significant cost savings for both plaintiff's and defense attorneys. The software and all of the relevant information can be found by going to www.econloss.com or clicking the link below.
Foreign Direct Investment
I work with foreign investors who invest in existing U.S. businesses. I aid in identification of investment opportunities, valuation of the potential targets, transaction negotiations, and auditing and monitoring of acquired companies.
We are a very active family. My wife Olga, who I have known since high school, has the toughest job in our house - she manages the incredible amount of energy that is produced by our three little boys. Timothy (8) in 2nd grade, Anthony (7) goes to 1st grade, and Matthew (3). Olga is also actively involved in several organizations that help kids with disabilities get engaged in sports and academic activities. We are active members of North Point Community Church.
My grandfather, my father, and my mother are PhDs who dedicated most of their lives to research and teaching. Although my path to academia was detoured via participation in the Russian national olympic team, job at one of the largest investment firms, and several business ventures, I have continued with the "family business".