Publikationen

Unsere Forschungergebnisse unterstützen die gesellschaftliche Debatte rund um aktuelle finanzökonomische Fragestellungen. Durch die Veröffentlichung der Arbeiten in internationalen Fachzeitschriften und unserer Working Paper Series sollen diese für einen möglichst breiten Adressatenkreis zugänglich werden.

HFRC Working Paper Series

Unsere Arbeitspapiere fassen die neuesten Ergebnisse aus der Forschungsarbeit des Instituts zusammen. Die Papiere stellen Diskussionsbeiträge dar und sollen zur kritischen Kommentierung der Ergebnisse anregen.

Alle Working Papers

Publikationen von Paul P. Momtaz

Decentralized finance, crypto funds, and value creation in tokenized firms

Douglas Cumming, Niclas Dombrowski, Wolfgang Drobetz, Paul P. Momtaz
HFRC Working Paper Series | Version 05/2022
Crypto Funds (CFs) represent a novel investor type in entrepreneurial finance. CFs intermediate Decentralized Finance (DeFi) markets by pooling contributions from crowd-investors and investing in tokenized startups, combining sophisticated venture- and hedge-style investment strategies. We compile a unique dataset combining token-based crowdfunding (or Initial Coin Offerings, ICOs) data with proprietary performance data of CFs. CF-backed startup ventures obtain higher ICO valuations, outperform their peers in the long run, and benefit from token price appreciation around CF investment disclosure in the secondary market. Moreover, CFs beat the market by roughly 2.5% per month. Their outperformance is persistent, suggesting that CFs deliver abnormal returns because of skill, rather than luck. These performance effects for CFs and CF-backed startups are driven by a fund’s investor network centrality. Overall, our study paves the way for research on what some refer to as the “crypto fund revolution” in entrepreneurial finance.

Valuing start-up firms: A reverse-engineering approach for fair-value multiples from venture capital transactions

Johannes Barg, Wolfgang Drobetz, Paul P. Momtaz
Finance Research Letters | 03/2021 | Forthcoming
The valuation of start-up firms is challenging, yet highly relevant for entrepreneurs and financiers alike. We reverse-engineer fair-value multiples by comparing the firm value at the time of financing with the firm value at the time of exit. Our framework produces reliable valuation multiples from observed venture capital transactions per industry and financing round. Despite their simplicity, sanity checks confirm that our multiples are highly performant in describing common valuation characteristics. Valuation multiples are higher when more experienced investors are involved, and when the exit occurs through an IPO rather than an M&A. In contrast, later stage financing rounds and larger investment consortia are associated with lower valuation multiples.

The economics of law enforcement: Quasi-experimental evidence from corporate takeover law

Gishan Dissanaike, Wolfgang Drobetz, Paul P. Momtaz, Jörg Rocholl
Journal of Corporate Finance | 12/2020 | Forthcoming
This paper examines the impact of takeover law enforcement on corporate acquisitions. We use the European Takeover Directive as a natural experiment, which harmonizes takeover law across countries, while leaving its enforcement to the discretion of individual countries. We exploit this heterogeneity in enforcement quality across countries in a difference-in-differences-in-differences model, while employing an overall inductive research approach, following Karpoff and Whittry’s (2018) recommendation. We find that acquirer returns increase in countries with improvements in takeover law, driven by better target selection and lower cost of financing. The increase in acquirer returns is lower in weak enforcement jurisdictions, which we identify by developing a novel Takeover Law Enforcement Index (TLEI). The findings show that takeover law can mitigate agency conflicts, but its true value depends on its enforcement. Our results are strongly robust to alternative model specifications.

Antitakeover provisions and firm value: New evidence from the M&A market

Wolfgang Drobetz, Paul P. Momtaz
Journal of Corporate Finance | 06/2020
New evidence from acquisition decisions suggests that antitakeover provisions (ATPs) may increase firm value when internal corporate governance is sufficiently strong. We document that, in Germany, firms with stronger ATPs, and particularly supermajority provisions, are better acquirers. Managers of high-ATP firms create value in acquisitions by making governance-improving deals. They are more likely to engage in acquisitions that reduce their own entrenchment level and less likely to invest in declining industries. The empirical evidence is consistent with a short-termist interpretation. Takeover threats can induce myopic investment decisions, which ATPs can mitigate. They lead managers to engage more often in value-creating long-term and innovative investing, and increase a firm's sensitivity to investment opportunities. Our findings contribute to a growing literature challenging conventional wisdom that the agency-increasing effect of ATPs empirically dominates the myopia-eliminating effect, suggesting that a more contextual view of the value implications of ATPs is necessary.

Competition policy and the profitability of corporate acquisitions

Gishan Dissanaike, Wolfgang Drobetz, Paul P. Momtaz
Journal of Corporate Finance | 06/2020
Merger control exists to help safeguard effective competition. However, findings from a natural experiment suggest that regulatory merger control reduces the profitability of corporate acquisitions. Uncertainty about merger control decisions reduces takeover threats from foreign and very large acquirers, therefore facilitating agency-motivated deals. Valuation effects are more pronounced in countries with stronger law enforcement and in more concentrated industries. Our results suggest that competition policy may impede the efficiency of the M&A market.

Corporate governance convergence in the European M&A market

Wolfgang Drobetz, Paul P. Momtaz
Finance Research Letters | 01/2020
Cross-border acquisitions lead to improvements in shareholder rights and more dispersed ownership structures in a large sample of intra-European takeovers. These findings are evidence of corporate governance convergence toward the Anglo-Saxon system through cross-border takeovers. However, we find no support for the corporate governance motive hypothesis in cross-border acquisitions even after accounting for potential sample selectivity. Although acquirers have significantly better shareholder rights than their targets, there are no robust marginal bidder wealth effects for firms that acquire either weaker or stronger governance foreign targets. Instead, bidder wealth effects in cross-border acquisitions are better explained by acculturation costs.

Investor sentiment and initial coin offerings

Wolfgang Drobetz, Paul P. Momtaz, Henning Schröder
Journal of Alternative Investments | 04/2019
The authors examine to what extent the market for initial coin offerings (ICOs) is driven by investor sentiment. Their results, based on a comprehensive set of sentiment and coin price data, suggest that the ICO market is driven by crypto-related sentiment, but is almost unrelated to general capital market sentiment. Among the crypto-related sentiment, social media channels, rather than traditional news channels, are the main source of investor sentiment. The authors find that ICO firms exploit “windows of opportunity” and avoid periods of negative sentiment. Coins listed during periods with negative investor sentiment generate negative returns in the short run. Moreover, returns to investors on the first day of trading predict long-run returns up to six months.