Essays on Financial Crisis.

Bubble and Crisis;Finance;Business and Economics;Business Administration

Oh, SeungjoonSeyhun, Hasan Nejat ;

University of Michigan

关键词: Bubble and Crisis;    Finance;    Business and Economics;    Business Administration;   

Others  :  https://deepblue.lib.umich.edu/bitstream/handle/2027.42/108833/sjoonoh_1.pdf?sequence=1&isAllowed=y

瑞士|英语

来源: The Illinois Digital Environment for Access to Learning and Scholarship

【 摘 要 】

My dissertation examines the effects of economic shocks on acquisition outcomes and the sources of housing market bubble. The first essay investigates how the combined effects of target firm- and industry-level distress affect acquisition outcomes through the fire-sale channel. I show that distressed targets are sold at discounts when the target industry is in distress. Consistent with the Shleifer and Vishny model, the fire-sale effects cause distressed targets to be sold to industry outsiders and acquirers to gain higher return by exploiting target;;s weakened bargaining power. I further demonstrate the fire-sale effects in acquisitions by showing that these findings are stronger for targets with acquirers that are in different industries or where targets have high industry asset-specificity. I then examine the contagion effects of fire-sale acquisitions on target rivals in the same industry. I find that rivals earn negative abnormal returns at the announcement due to negative information from fire-sale acquisitions. Overall, the results show that the fire-sale discount in distressed target acquisitions is an important determinant of financial distress costs of a firm and contributes to industry-specific contagion of economic shocks. In the second essay, I explore (with a coauthor) whether state-level variation in recourse mortgage laws affects housing prices and mortgage lending. In a state with non-recourse mortgage law, borrowers have limited liability on their mortgage loan. We find that non-recourse law results in larger bubbles in housing prices, and identify the causal effects by comparing housing prices in contiguous border county-pairs in the United States and examine discontinuities at state borders. We also explore whether mortgage lending behavior in non-recourse states reflects anticipation of additional risk. We find that loan-to-value ratio is lower and mortgage interest rate and loan denial rate are higher in non-recourse states, which suggest that lenders are aware of additional risk in non-recourse loans. However, we find that because the emergence of the originate-to-distribute (OTD) model in the housing markets enables lenders to effectively shift the risks to other investors, mortgage lending behavior does not fully reflect the higher risk.