Mihaylo College of Business and Economics
California State University - Fullerton
800 N. State College Blvd.
Fullerton, CA 92831
NBER Working Papers and Publications
|October 2017||The Economics of PIPEs|
with Michael W. Schwert, Michael S. Weisbach: w23967
This paper considers a sample of 3,001 private investments in public equities (PIPEs). Issuing firms tend to be small and poorly performing, so have limited access to traditional sources of finance. To attract capital, they offer shares in a PIPE at a substantial discount to the market price, along with warrants and a collection of other rights. Because of the discount at issuance, PIPE returns decline with the holding period, which itself is a function of registration status and liquidity of the shares issued in the PIPE. Assuming that the PIPE investor sells 10% of volume each day following the issuance, the average PIPE investor holds the stock for 384 days and earns an abnormal return of 21.2%. More risky firms tend to raise capital from relatively risk tolerant investors such as hedg...
|March 2013||Indirect Incentives of Hedge Fund Managers|
with Berk A. Sensoy, Michael S. Weisbach: w18903
Indirect incentives exist in the money management industry when good current performance increases future inflows of new capital, leading to higher future fees. We quantify the magnitude of indirect performance incentives for hedge fund managers. Flows respond quickly and strongly to performance; lagged performance has a monotonically decreasing impact on flows as lags increase up to two years. Conservative estimates indicate that indirect incentives for the average fund are four times as large as direct incentives from incentive fees and returns to managers' own investment in the fund. For new funds, indirect incentives are seven times as large as direct incentives. Combining direct and indirect incentives, for each dollar generated for their investors in a given year, managers receive cl...
Published: Jongha Lim & Berk A. Sensoy & Michael S. Weisbach, 2016. "Indirect Incentives of Hedge Fund Managers," Journal of Finance, American Finance Association, vol. 71(2), pages 871-918, 04. citation courtesy of
|September 2012||Syndicated Loan Spreads and the Composition of the Syndicate|
with Bernadette A. Minton, Michael Weisbach: w18356
The past decade has seen significant changes in the structure of the corporate lending market, with non-bank institutional investors playing larger roles than they historically have played. These non-bank institutional lenders typically have higher required rates of return than banks, but invest in the same loan facilities. We hypothesize that non-bank institutional lenders invest in loan facilities that would not otherwise be filled by banks, so that the arranger has to offer a higher spread to attract the non-bank institution. In a sample of 20,031 leveraged loan facilities originated between 1997 and 2007, we find that, loan facilities including a non-bank institution in their syndicates have higher spreads than otherwise identical bank-only facilities. Contrary to risk-based explanatio...
Published: Lim, Jongha & Minton, Bernadette A. & Weisbach, Michael S., 2014. "Syndicated loan spreads and the composition of the syndicate," Journal of Financial Economics, Elsevier, vol. 111(1), pages 45-69. citation courtesy of
|February 2012||Equity-Holding Institutional Lenders: Do they Receive Better Terms?|
with Bernadette A. Minton, Michael S. Weisbach: w17856
The past decade has seen significant changes in the structure of the corporate lending market, with non-commercial bank institutional investors playing larger roles than they historically have played. In addition, non-commercial bank institutional lenders are often equity holders in their borrowing firms. In our sample of 11,137 tranches of institutional "leveraged" loans, 2,008 (18%) have a non-commercial bank institution that also owns at least 0.1% of the firm's equity. Such "dual holder" loan tranches have higher spreads than otherwise similar loan tranches without equity holder participation. The dual holder premium is present for both revolver and term loans, and exists within all non-investment grade credit rating classes. Contrary to risk-based explanations of this finding, dual ho...
Published: “Syndicated Loan Spreads and the Composition of the Syndicate” (with Jongha Lim and Bernadette A. Minton), Journal of Financial Economics, Vol. 111 (January 2014), pp. 45-69.