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18 September 2014  

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See the latest research from the ECGI published in the ECGI Finance Working Paper series
Fri, 15 Aug 2014 17:39 GMT  
ECGI Finance Working Paper 435/2014

Jean-Marie Meier, London Business School Henri Servaes, London Business School and ECGI

Submitted by
Henri Servaes
Fire sales, Mergers and Acquisitions, Distress, Bankruptcy, Restructuring

Firms that buy distressed and bankrupt companies or some of these companiesí assets earn excess returns that are at least 1.6 percentage points higher than when they make regular acquisitions. These returns come at the expense of the target firmís shareholders, while overall wealth gains are not affected. Returns to acquirers of distressed assets are higher when fewer large firms operate in the target firmís industry, and when firms in the targetís industry have lower liquidity, and are financially constrained, thus limiting the number of potential buyers. They are lower when the M&A market in the target firmís industry is more vibrant, when the targetís assets have more alternative uses, and when the economy is doing well. This evidence is consistent with the view that some firms can take advantage of fire sales by distressed and bankrupt companies needing to sell assets while restructuring.

to view details and download this Working Paper from the SSRN website

All ECGI Working Papers in the Law and Finance series are available on the ECGI website at www.ecgi.org/wp
See the latest research from the ECGI published in the ECGI Law Working Paper series
Fri, 15 Aug 2014 17:46 GMT  
ECGI Law Working Paper 261/2014

Brian Cheffins, University of Cambridge and ECGI Steven Bank, University of California Harwell Wells, Temple University

Submitted by
Brian Cheffins
corporate law, state jurisdictions, incorporation, shareholder protection

The most enduring and widespread academic disputes in American corporate law concern jurisdictional competition. Scholars have debated, at great length, questions stemming from the ability of corporations to choose what jurisdiction to incorporate in: To what extent do states compete for incorporations? Has the jurisdictional competition between states produced better or worse corporation law (has it been a ďrace to the bottomĒ, or one to the top)? To what extent has the Federal government influenced this state competition? Is meaningful state competition still occurring or was the race won or lost long ago? Debates over these questions have often foundered because of difficulties associated with ascertaining whether the corporation law in question is good or bad, and whether it has gotten better or worse over time. In this Article, we seek to break the scholarly log jams concerning corporate law federalism by undertaking the first systematic attempt to measure how U.S. corporate law has evolved since 1900. Using three indices developed to measure the relative strength of corporation law across nations, we evaluate three vital bodies of U.S. corporate law, those of Delaware and Illinois and the Model Business Corporation Act, from the beginning of the twentieth century to the present day. Our results are novel in several respects. We find that the protections afforded to shareholders by state corporation law have decreased since 1900 but only modestly so, which implies that state competition has not been very vigorous. When we use measures that count protections provided by federal as well as state law, however, we get a different result. We find that requirements adopted by the federal government since the 1930s have significantly increased shareholder protection, suggesting that federal intervention has played a crucial and perhaps underappreciated role in shaping U.S. corporate law and enhancing shareholder rights. Beyond its specific findings, this studyís methods provide scholars new ways to answer some of the most fundamental questions in corporate law.

to view details and download this Working Paper from the SSRN website

All ECGI Working Papers in the Law and Finance series are available on the ECGI website at www.ecgi.org/wp