Shelter from Extreme Natural Disasters: Climate Risk Diversification through M&A
Written in Aug 2025
Presentation: India Finance Conference (2025, scheduled)
Abstract: Extreme natural disasters have become more frequent in recent years, exerting significant pressure on corporate decision-making. This paper demonstrates that firms facing higher physical climate risk as measured by exposure to billion-dollar natural disaster events are more likely to engage in M&As and to select targets with substantially lower climate risk. High-risk acquirers are also more inclined to pursue out-of-state deals, particularly out-of-state acquisitions in related industries. Further analysis reveals that within these two deal types, announcement period wealth effects are stronger when the climate risk gap between acquirer and target is larger. Finally, climate risk diversifying M&As, defined as high-risk acquirers taking over low-risk targets, are followed by improved operating performance and measurable reductions in subsequent disaster risk.
On the Impact of Trade Secrecy Laws: Evidence from Strategic Alliances and Joint Ventures
with Chinmoy Ghosh and Jaideep Shenoy
Presentation: American Law and Economics Association Meetings at University of Michigan (2024); FMA-Asia/Pacific (2024); India Finance Conference (2024)
Abstract: We examine how an increase in the legal protection of trade secrets influences firms' decisions to form strategic alliances and joint ventures, as well as the associated valuation effects. For identification, we utilize the staggered passage of the Uniform Trade Secrets Act (UTSA) across states from 1990 to 2015. We find that there is a greater propensity for alliance formation in states that experience an increase in trade secrecy protection following the passage of UTSA. Furthermore, we show that investors attribute more value to alliances that offer higher legal protection for trade secrets than those with lower protection. We also document better operating performance changes in alliances where there was a greater increase in trade secret protection. Taken together, our evidence suggests that the adoption of trade secrecy laws encourages firms to open their boundaries to contractual relationships, plausibly due to the lower risk of trade secret misappropriation. Our evidence also highlights the real and valuation effects of UTSA laws.
with Chinmoy Ghosh, Yogesh Chauhan, and Manju Jaiswall
American Business Review, 2025, 28(2), 5. (ABDC Journal Quality List: A)
Abstract: We examine how informal institutions—specifically, national culture—shape the choice of payment methods in cross-border mergers and acquisitions (M&As). Our analysis shows that acquirers from countries with high levels of individualism are less likely to finance acquisitions using stock, whereas acquirers from high uncertainty avoidance cultures are more inclined to do so. Furthermore, the negative association between individualism and stock financing is more pronounced in transactions with greater anticipated synergy gains. These results are robust to a range of firm-level controls, country-specific factors, and alternative proxies for national culture.