Conference Agenda

Using detailed data on employees’ campaign contributions to Democrats and Republicans, we find that firms are considerably more likely to announce and complete a merger when their political attitudes are closer. Furthermore, acquisition announcement returns and post-merger performance are higher when employees have more similar political attitudes. The effects are stronger when political polarization is greater, during economic expansions, and when the target and acquirer plan to integrate operations. The effect of political attitudes is distinct from that of corporate culture. Overall, we provide new estimates that political attitudes and polarization affect the allocation of real assets in the economy.

We provide the first systematic evidence of contractual innovation in the terms of poison pill plans. In response to the increase in hedge fund activism, pills have changed to include anti-activist provisions, such as low trigger thresholds and acting-in-concert provisions. Using unique data on hedge fund views of SEC filings as a proxy for the threat of activists’ interventions, we show that hedge fund interest predicts pill adoptions. Moreover, the likelihood of a 13D filing declines after firms adopt “antiactivist” pills, suggesting that pills are effective in deterring activists. The results are particularly strong for “NOL” pills that, due to tax laws, have a five percent trigger. Our analysis has implications for understanding the modern dynamics of market discipline of managers in public corporations and evaluating policies that regulate defensive tactics.

This paper uses mergers and acquisitions (M&A) and textual analysis of firms' financial filings to show that competitive approach constitutes an important determinant of firms' investment decisions. The analysis reveals that becoming an acquirer or a target depends on the competitive approach. Moreover, M&A deals are more likely between companies implementing the same competitive approach. Those deals yield higher combined announcement returns, asset and sales growth. The same approach effect is stronger in a highly competitive environment and within an industry, suggesting that acquirer and target misalignment in competitive approaches constraints the optimal response to investment opportunities and market threats.