HEGE Ulrich

Using the Sarbanes-Oxley Act of 2002 as a quasi-natural experiment to identify the impact of corporate governance reform on foreign exchange risk hedging, we find that the substantial improvements in governance standards increased derivatives hedging and reduced foreign exchange exposure. The results are robust whether we consider initial reform gap or actual implementation, focus on legally required governance measures or include voluntary concomitant reforms. The economic magnitude of the effect is large. Our findings are corroborated by cross-sectional evidence, showing that firms with larger foreign markets exposure and a larger distortion in CEO incentives react more strongly to the reform. Financial hedges are implemented rapidly whereas exposure measures that encompass operational hedges take more time to adjust.

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This thesis discusses the business of encouraging entrepreneurial and innovative activities. The first chapter examines and evaluates the private sector's response to public participation in venture capital. The second chapter investigates and estimates the performance gap between government and private venture capital funds and the determinants of this gap. The third chapter provides a theoretical framework for understanding and analyzing the motivation for firm-level innovation in industrial networks. In Chapter 1, titled "Can Governments Foster Venture Capital Development?", I examine the role of government intervention in the emergence of venture capital (VC) in China from 1999 to 2013, using a unique policy experiment and innovative data base. The statistical analysis, using the double-difference method, shows that the central government's program leads to an increase in local investment by both public and private VC funds. In Chapter 2, titled "(Under)performance of public venture capital: evidence and explanations," I use a sample from the same source as in Chapter 1, and find that startups backed by government VC funds are less likely to go public than private VC funds. The results indicate that the performance gap is reduced as the venture capital market moves to a more advanced stage. In Chapter 3, "Corporate Association under Imperfect Information along the Global Value Chain," (co-authored with Rui Zhang), we show the existence of multiple equilibria in which a supplier may be associated with different seats, but at different stages of the value chain. Our model also includes countervailing forces of firm innovation incentives and we predict a non-monotonic trend between innovation and firm productivity.

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This paper focuses on dominant owners' use of leverage to finance their blockholdings and its relationship to dividend policy. We postulate that blockholder leverage may impact payout policy, in particular when earnings are hit by a negative shock. We use panel data for France where blockholders have tax incentives to structure their leverage in pyramidal holding companies and study the effect of the financial crisis in 2008/2009. We find no difference in payout policy and financial behavior during the 1999 to 2008 period between firms with levered owners and other firms. However, in the years 2009 to 2011 following the crisis, dividend payouts increase in proportion to pyramidal debt of dominant owners. We inspect pyramidal entities individually and find that on average only 60% of dividends are passed through to the ultimate owners, with the rest predominantly used to meet debt service obligations of the pyramidal entities.

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This thesis focuses on unexplored issues in corporate venture capital (CVC). This research mobilizes the resource-based approach, the knowledge-based approach, organizational learning with a particular focus on the concept of ambidexterity, the real options approach and network theory. The empirical analysis covers the period from 1998 to 2017 and is based on 4,206 U.S. companies for the first test, 1,547 U.S. biotech companies for the second test, and 12,895 investments made by 274 North American CVC investors for the third test. To test all our hypotheses, we use multiple regressions (OLS, negative binomial regression, double least squares method,...). In the first test, we show, using the real options approach, that when exogenous uncertainty is reduced, CVC-funded firms enjoy higher investment amounts and longer investment duration. Two factors reduce uncertainty and enhance the organizational learning process: the strength of the relationship and the geographic proximity between the investor and the funded firm. Additional investment inflows lead to more frequent IPO for independent VC-backed firms while longer investment duration leads to more frequent exit by acquisition for CVC-backed firms for reasons related to organizational learning. In the second test, CVC-supported firms exhibit higher innovation rates than their IVC-supported counterparts. The innovation performance of CVC-backed firms depends on their ability to leverage the complementary resources of their investors. We propose three mechanisms that improve the innovation rate: the absorptive capacity of the funded firms, the strength of the linkages, and the geographic proximity between the funding firms and the funded firms. In the third test, sequential ambidexterity leads to better financial performance for the investor than balanced or simultaneous forms of ambidexterity in VC investments. Finally, the combination of balanced and simultaneous forms of ambidexterity produces synergies and improves the financial performance of the CVC investment.

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We investigate the role of industry specialization in horizontal cross-border merg- ers and acquisitions. We find that acquirers from more specialized industries in a country are more likely to buy foreign targets in countries that are less specialized in these same industries. The role of industry specialization in foreign acquisitions is more prevalent when contracting inefficiencies and exporting costs limit arms' length relationships. The economic gains in cross-border deals are larger when spe- cialized acquirers purchase assets in less specialized industries. These results are consistent with an internalization motive for foreign acquisitions, through which acquirers can apply localized intangibles on foreign assets.

In an economic environment that is increasingly competitive, tense and uncertain, companies must demonstrate adaptability, precaution and anticipation. This manuscript addresses several themes related to this observation, which closely touch the notion of cash management. The first essay of this thesis shows that the distribution of a stock dividend allows firms to temporarily reduce the remuneration of their shareholders, without being sanctioned by the latter. This mechanism allows firms to maintain liquidity and flexibility in times of economic contraction. The second essay deals with the link between customer risk and liquidity management policy. Increased customer risk seems to push firms to hold more cash and to use credit lines less. Finally, the third essay justifies the interest of establishing long-term customer-supplier relationships. These partnerships appear to be a source of increased efficiency and profitability in the operational cycle of companies.

The fastest growing segment of private equity (PE) deals is secondary buyouts (SBOs)—sales from one PE fund to another. Using a comprehensive sample of leveraged buyouts, we investigate whether SBOs are value-maximizing, or reflect opportunistic behavior. To proxy for adverse incentives, we develop buy and sell pressure indexes based on how close PE funds are to the end of their investment period or lifetime, their unused capital, reputation, deal activity, and fundraising frequency. We report that funds under pressure engage more in SBOs. Pressured buyers pay higher multiples, use less leverage, and syndicate less suggesting that their motive is to spend equity. Pressured sellers exit at lower multiples and have shorter holding periods. When pressured counterparties meet, deal multiples depend on differential bargaining power. Moreover, funds that invested under pressure underperform.

This paper explores whether private equity firms that are new to the industry take excessive risks relative to funds from established firms. We use differences between the implicit incentives of managers of experienced and of novice funds as an identification strategy. We find that novice funds invest more slowly than experienced funds, contradicting the risk-taking hypothesis. However, the size of their investments, in value and as fraction of fund size, is larger. this could be consistent with risk-shifting by novice funds but also with alternative hypotheses. We find that the size difference increases over time and is absent from buyout investments. We also find that novice funds tend to underperform most dramatically for early large investments, and that the size of their investments increases after a first successful exit. These and other findings are in conflict with the excessive risk-taking hypothesis, but largely consistent with alternative explanations that emphasize differences in expertise.

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This thesis consists of four articles. The first article with Johan Hombert shows that when banking relationships are affected, this reduces the number of innovative firms and also leads to an increase in the geographic mobility of inventors, who leave states where banking relationships are degraded. The second article is a paper with Claire Célerier highlighting the role of supply in the phenomenon of unbanking of the poor in the United States. The third article studies innovation externalities and shows that when some firms innovate less, other local firms innovate less in response. This effect decreases rapidly with distance. The fourth paper, in collaboration with Olivier Dessaint, shows that managers systematically respond to liquidity shocks close to them by temporarily increasing their treasury.

This thesis consists of four separate chapters. The first chapter presents work written in collaboration with Christophe Spaenjers. We show that individuals with a subjective life expectancy that is longer, have a fraction of conditional actions that is increased.The effect of a decreasing life expectancy is mitigated by legation motives.In the second chapter, I study the importance of birth sequence for financial decisions.I show that elders differ from their siblings in their decisions.The results accentuate the importance of family experiences for agents' choices. In the third chapter, I show that the presence of an entourage decreases the probability of a response, and increases the propensity for exaggerated self-evaluation of ability. This observation implies an underestimation of the importance of aplomb for the behavior of individuals. The fourth chapter is the result of a collaboration with Thomas Bourveau and François Brochet.We identify complaints in which complainants allege that the company hid poor performance related to an acquisition. Using the proclamation of complaints as an industry treatment, we find results consistent with an effect disciplining the investment behavior of other industry executives.

This thesis pursues four research objectives, the combination of which is intended to contribute to the understanding of the functioning of the venture capital (VC) market. The first objective is to provide a synthesis of the literature on the exit stage of venture capital. The survey begins by describing the VC funding process by highlighting how the industry operates to manage the information asymmetry between the entrepreneur and the VC investor. The survey also highlights the central position of the exit stage in the VC funding cycle. Indeed, VC firms are managed by professionals who provide capital and expertise to entrepreneurial companies; portfolio companies typically do not pay dividends, and the returns generated by the investment are realized through an exit event, indicating that a profitable exit is at the heart of the venture capital industry. In particular, the survey focuses on the determinants of the exit phase, and examines how the exit choice may vary depending on the goals of the venture capitalist and the entrepreneur. The research question of the first empirical chapter focuses on the competitive effect of venture capital financing in IPOs. Two hypotheses underlie this study. First, if IPO announcements reveal valuable information about the firms being introduced, it is likely that investors in competing firms use this information to reassess the value and prospects of their own firms. Therefore, IPO announcements are likely to have externality effects on rival firms. Second, if venture capitalists are seen as having a role in helping their firms deal with the public market, competitors are likely to react differently to IPOs of VC-backed firms. Accordingly, the following two research questions were formulated: (1) what is the reaction of competitors to the announcement of IPOs? And (2) does the reaction of competitors differ according to the status of the companies issued? Consistent with the literature, the results show that in France, IPOs of companies without VC financing create a negative reaction towards competitors operating in the same sector of activity. This suggests that IPO firms will be able to improve their competitive position. In a different way, the IPO of a company financed by CR has a positive announcement effect on the stock market performance of its competitors. This result suggests that the public market views the IPO of CR-supported firms as a positive signal about the prospects of the market as a whole, from which competitors can also benefit. In fact, this positive relationship suggests that IPOs of VC-backed firms signal positive market conditions. Thus, conferring on venture capitalists a power of foresight, where the venture capitalist will decide to list his company when the stock market valuation is high.

This dissertation is composed of three distinct chapters, which aim to empirically analyze financial innovation in different fields: household finance, public finance, and the financial sector. The first chapter, written in collaboration with Claire Célérier, analyzes the increasing complexity of financial products offered to retail investors and suggests that this complexity is used by banks to reduce competitive pressure. The second chapter, written with Christophe Pérignon, focuses on toxic loans issued by local governments, and how their use is part of a political incentive system. The third chapter examines how the adoption of an innovative type of bond, representing conditional capital, can contribute to solving the dilemma of bank leverage.

During the last decade an increasing fraction of PE exits have been secondary deals, in which one PE fund sells their portfolio company to another PE fund. On a comprehensive sample of 9,771 LBO deals in the U.S. and in 12 European countries from 1980 to 2010, this paper investigates to what extent secondary deals are outcomes of opportunistic behavior of the sponsor or adverse incentives of the PE contract. We report evidence that a secondary deal is significantly more likely if either the buyer fund is under pressure to invest or if the seller fund is under pressure to exit. We measure deal pressure by the closeness to the end of the lifecycle/investment period of a fund, by its degree of inactivity or unused funds and by its lack of reputation. Deal pressure also has an impact on deal valuation: Buyers under pressure pay relatively more for the secondary deals that they enter into, while sellers under pressure are willing to accept lower prices for their portfolio firms in secondary buyouts. The latter effect in dominated by the former suggesting that sellers have more bargaining power in secondary transactions.

During the last decade an increasing fraction of PE exits have been secondary deals, in which one PE fund sells their portfolio company to another PE fund. On a comprehensive sample of 9,771 LBO deals in the U.S. and in 12 European countries from 1980 to 2010, this paper investigates to what extent secondary deals are outcomes of opportunistic behavior of the sponsor or adverse incentives of the PE contract. We report evidence that a secondary deal is significantly more likely if either the buyer fund is under pressure to invest or if the seller fund is under pressure to exit. We measure deal pressure by the closeness to the end of the lifecycle/investment period of a fund, by its degree of inactivity or unused funds and by its lack of reputation. Deal pressure also has an impact on deal valuation: Buyers under pressure pay relatively more for the secondary deals that they enter into, while sellers under pressure are willing to accept lower prices for their portfolio firms in secondary buyouts. The latter effect in dominated by the former suggesting that sellers have more bargaining power in secondary transactions.

During the last decade an increasing fraction of PE exits have been secondary deals, in which one PE fund sells their portfolio company to another PE fund. On a comprehensive sample of 9,771 LBO deals in the U.S. and in 12 European countries from 1980 to 2010, this paper investigates to what extent secondary deals are outcomes of opportunistic behavior of the sponsor or adverse incentives of the PE contract. We report evidence that a secondary deal is significantly more likely if either the buyer fund is under pressure to invest or if the seller fund is under pressure to exit. We measure deal pressure by the closeness to the end of the lifecycle/investment period of a fund, by its degree of inactivity or unused funds and by its lack of reputation. Deal pressure also has an impact on deal valuation: Buyers under pressure pay relatively more for the secondary deals that they enter into, while sellers under pressure are willing to accept lower prices for their portfolio firms in secondary buyouts. The latter effect in dominated by the former suggesting that sellers have more bargaining power in secondary transactions.

We analyze the implications of the decision to spawn or to retain a new product for the nature and evolution of the firm. In our model, a new product is spawned if the fit between the product and its parent firm organization is not adequate. We focus on the impact of the firm's history of spawning decisions on firm characteristics such as size, focus, profitability, and innovativeness, and analyze its role in shaping firm dynamics. In accordance with the empirical literature, our model predicts that older firms innovate less, spawn less, are more diversified and less profitable, and that firms with more valuable general or specialized resources innovate and spawn more. Echoing seemingly contradictory empirical findings, our model predicts that small, focused firms (large, diversified firms) innovate and spawn more, and are more profitable when sample heterogeneity is driven by the importance of organizational fit (the value of general resources).

This thesis consists of four separate chapters. In the first chapter, I use an exogenous restriction on the ability of road haulage firms to grant payment terms to their customers. I show that some firms lend to their customers at the expense of their investments, their profitability and by exposing themselves to the risk of default. In the second chapter, I show that investment funds with a long time horizon choose younger firms at a less advanced stage of development. Firms invested by funds with a longer time horizon increase their patent stock faster than those invested by funds with a shorter time horizon. The third chapter is the result of a collaboration with Ron Kaniel and David Sraer. We use detailed broker data and undertake a quantitative exploration of individual investor behavior during the 2008 financial crisis. We show that investors who look the most sophisticated in the pre-crisis period have a lower propensity to flee to risk-free assets, and a higher propensity to be liquidity providers and earn high returns during the crisis. In the fourth chapter, I explore the idea that households have limited knowledge of their portfolio's exposure to systematic risk factors, which leads them to make mistakes. This idea is applied to individual investors' decision to actively rather than passively invest in equity markets.

The financing of biotech firms (EBs) is approached according to two main lines of research, financial constraints (CFI) and financial structures (FS). Our objective is to examine, from an international perspective, the existence of IFCs and of a specific FS for this type of firm, which belongs to the category of technologically innovative enterprises (TIEs). To do this, we divide the countries in our sample into models of capitalism, with, on the one hand, the EBs of "neo- or ultra-liberal" countries (PL) and, on the other, "intermediated" (PI). This division allows us to reveal the "systemic" differences. In addition, individual considerations (characteristics of BHCs) and cyclical considerations (taking into account the stock market crash in the spring of 2000) are included as other determinants of BHC financing conditions. This three-pronged approach (structural, cyclical and individual) (based on panel data) shows that differences are observed at the aggregate level between LPs and IPs, and between LPs (excluding the United States and the United States alone), whether in IFCs or FS. Nevertheless, it would seem that public equity issuance is very important everywhere in terms of IFCs and FS. But, on the other hand, the cost of capital of EBs did not appear to be significant.

This research, consisting of three independent essays, studies the effects of information production and emotions in financial decision making. The objective of this research is to identify conditions under which corporate executives are led to make biased financial decisions, with a particular focus on the role of financial analysts' information production activity and executives' regret aversion. In the first essay, I empirically test the hypothesis that managers reduce their firm's level of investment to meet or exceed financial analysts' earnings per share forecasts. In the second essay, I build a theoretical model to study the influence of financial analysts on firms' investment decisions through their impact on price informativeness in financial markets. The third essay explores the influence of regret aversion on the exchange rate hedging decisions of a portfolio manager.