I am currently an assistant professor in finance at Penn State University. My research applies both game theory and mechanism design to practical issues in corporate finance and entrepreneurial finance. My work also examines the implications of these theoretical findings from an empirical perspective.
Job Market Paper
An important yet understudied aspect of mergers and acquisitions is the selling procedure. This paper compares a seller's revenue in a standard English ascending auction to that in a negotiation with a “go-shop” provision. In the latter, the target privately negotiates with a few bidders, signs a tentative merger agreement with one of them, and then solicits additional bids publicly during a “go-shop” period. With a theoretical framework, I show that a “go-shop” negotiation generates higher seller revenue than does an auction, when (i) the costs to bidders of learning their valuations are sufficiently high, (ii) the bidders' valuations are moderately correlated with each other, and (iii) the bidders’ prior probabilities of the existence of gains from trade are sufficiently low. The theoretical results are broadly consistent with empirical evidence, and they provide a novel explanation for the prevalence of “go-shop” negotiations in private equity deals.
In a dynamic model of merger negotiation with two-sided private information and two-sided endogenous initiation, this paper investigates (1) what determines the timing of M&A initiation, (2) who initiates the M&A negotiation, and (3) why bid premia were higher for bidder-initiated deals than target-initiated deals. The key driving force for the results is that the timing of initiation can reveal information about the target's private signal regarding its stand-alone value, and the bidder's private signal about its valuation for the target's firm. The model predictions are consistent with the empirical literature that emphasizes the role of private information in deal-initiation.