NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Matthias Kahl

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Working Papers

May 2005Eat or Be Eaten: A Theory of Mergers and Merger Waves
with Gary Gorton, Richard Rosen: w11364

Published: Gary Gorton & Matthias Kahl & Richard J. Rosen, 2009. "Eat or Be Eaten: A Theory of Mergers and Firm Size," Journal of Finance, American Finance Association, vol. 64(3), pages 1291-1344, 06.

In this paper, we present a model of defensive mergers and merger waves. We argue that mergers and merger waves can occur when managers prefer that their firms remain independent rather than be acquired. We assume that managers can reduce their chance of being acquired by acquiring another firm and hence increasing the size of their own firm. We show that if managers value private benefits of control sufficiently, they may engage in unprofitable defensive acquisitions. A technological or regulatory change that makes acquisitions profitable in some future states of the world can induce a preemptive wave of unprofitable, defensive acquisitions. The timing of mergers, the identity of acquirers and targets, and the profitability of acquisitions depend on the size of the private benefits of con...
May 2002Paper millionaires: How valuable is stock to a stockholder who is restricted from selling it?
with Jun Liu, Francis A. Longstaff: w8969

Published: Kahl, Matthias, Jun Liu, and Francis A. Longstaff. "Paper Millionaires: How Valuable is Stock to a Stockholder Who is Restricted from Selling it?" The Journal of Financial Economics 67 (2003): 385-410.

Many firms have stockholders who face severe restrictions on their ability to sell their shares and diversify the risk of their personal wealth. We study the costs of these liquidity restrictions on stockholders using a continuous-time portfolio choice framework. These restrictions have major effects on the optimal investment and consumption strategies because of the need to hedge the illiquid stock position and smooth consumption in anticipation of the eventual lapse of the restrictions. These results provide a number of important insights about the effects of illiquidity in financial markets.
May 1999Blockholder Identity, Equity Ownership Structures, and Hostile Takeovers
with Gary Gorton: w7123
We determine firms' equity ownership structures and provide a theory of hostile takeovers by distinguishing the roles of two types of blockholders: rich investors and institutional investors. We also distinguish the roles of two types of stock markets: the block market and the market with small investors. Rich investors have their own money at stake while institutional investors are run by professional managers and hence face agency conflicts. Because rich investors face no agency problems they are better at monitoring managers. If their wealth is insufficient to control all corporations, then agency-cost free' capital is scarce. We investigate the allocation of this scarce resource. A hostile takeover is the consequence of a state-contingent allocation of agency-cost free capital. W...

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