{{McNair ProjectsAcademicPaper|Project TitleHas title=Winner's Curse in Acquistions Acquisitions (Academic Paper),|Topic AreaHas author=Economic and Business TrendsEd Egan,Jim Brander|OwnerHas RAs=Ed EganAmir Kazempour, Will Cleland, Amir K, Jake Silberman,|Start Term=Fall 2016,|Status=Active,|Deliverable=Academic Paper,|AudienceHas paper status=Academics,|Primary Billing=AccMcNair01,Published
}}
==To do listSummary==* Including public acquisitions* Find SIC codes for the old data, also for the public firms that are now included.
* Data from SDC** Social criteria This paper finds evidence consistent with a Winner's Curse in the acquisitions announcement dates 1985 of privately- present** Acquirer publicly traded ( must be AMEX, NASDAQ, or NYSE)** Target status held firms. This Winner's Curse is public or private ** Acquirer and target aggravated when there are U.S. firms.** Acq of 100 percent of the firm more potential bidders and Acq/or greater information asymmetries. completed** GVKEY
* Variable list The paper was accepted for SDC** CUSIP ** Exchange publication in the Quarterly Review of Economics and ticker ** Company name ** Acq transaction value** Acq announcement date** Number Finance in February of bidders** NAICS codes for target and Acq2017.** Addresses ** T* Variables for CRISP(daily) ** Stock price** Returns** ==Dbase Notes==
* Variable --SDC_TABLE.sql --START AT NEW CODE SDC --Raw data in SDCBase --No dups SDCV2 --Code and restrict 40216 SDCNo --Build AcqNo SDCA1 --Add previous acqs SDCA2 --Add bin for IT (from SDCwIT) SDCA3 --Add bin for COMPUSTAT pub/priv ( Everything 1980 from SDC_test) SDCA4 --Add indu FE (40216) --CRSP_TABLE.sql CRSPFinal --Processed Raw CRSPMain --w/ cusip6 CRSPRelNoInc --Add in the DayNo and lose irrelevant CUSIP EstimationBaseNoDups Estimation1-5 5 --output tables EstimationTotal --THIS IS LIKELY DEPRECATED Competition EventBase --Only SDC relevant CUSIP -3 to +3 ... Flatten1 -- Rn3 to Rp3 and VRn3 to VRp3 Flatter -- Collapse 32109 EstimationOutput --Load it back up 30950 AbnormalReturn1 --Join back to presentFlatter ABR2 --Abnormal returns (plus momentum) ** Acq market value of assets AbRet --CARs 30950 ------------- Turnover --NEEDS REWORKING tobinq -- CPI** NAICS codes** Sales Below that is supersceeded** GVKEY** intangible assets --GOV_Table and GOVERNANCE_NOTES.txt** TOBIN's Q --Malmendier_tate.sql
Magic with CUSIPs : CUSIP is a nine digit number (possibly ten, ) Seven issuer, two issue, one check CRSP processing notes: estimation window 250 days ending 30 days before the Acq. must be at least 50 continuous days before the 30 days window. See page 9 of the paper for data processing notes. FROM http://www.edegan.com/repository/DD-ThomsonSDCMA.txt ==Governance List of Variables== KNIGHTBACKENDAWKBSIGINDCODE Target/Acquiror Significant Individual Codes. ESOP Employee Stock Ownership Plan Flag: Yes/No flag set to 'Y' where acquiror includes an Employee Stock Ownership Plan of the target company. See also EMP (Employee Participation Flag), where the acquiror includes employees of the target company. CHA Challenging Bid Flag: Yes/No flag set to 'Y' where a third party launched an offer for the target while this original bid was pending. Challenging bids are covered under a separate record and deal number with challenger as Acquiror. CHOICE Choice of Considerations Flag: Yes/No flag set to 'Y' in a deal in which an acquiror offers the target shareholders alternative considerations. For example, shareholders may be offered the choice of a fixed number of shares or a different amount in cash. COMPETEACIDGEN Challenged Deal Acquiror CIDGEN. COMPETEACU Challenged Deal Acquiror CUSIP: CUSIP of the company that has made a competing offer for the target. CREEP Creeping Purchase Flag: Yes/No flag set to 'Y' when the acquiror has made creeping purchases; that is, accumulates a majority interest through a series of stake purchases, either through private or open market transactions. DEF Defense Tactic Flag: Yes/No flag set to 'Y' when the target employs a defensive tactic to countervail a takeover attempt by an unwanted suitor. Examples include poison pills, lock-ups, greenmail, white knights, etc. DEFTAC Defense Tactics Description: Description of all defensive tactics employed to thwart an unsolicited or hostile offer: DREP Defensive Repurchase Flag: Yes/No set to 'Y' when the target company buys back stock on the open market or in privately negotiated transactions as a defensive measure. This item is noted on the hostile or potentially hostile deal and on its related repurchase deal, indicating that the transaction is a defensive recapitalization. DSELF Defensive Self-Tender Flag: Yes/No flag set to 'Y' where the target company offers to buy back stock through a tender offer as a defensive tactic. This item is noted on the hostile or potentially hostile deal and on its related self-tender deal, indicating that the transaction is a defensive self-tender. EMP Employee Participation Flag: Yes/No flag set to 'Y' where acquiror includes employees of the target company. See also ESOP, where acquiror includes and Employee Stock Ownership Plan of the target company. EO Exchange Offer Flag: Yes/No flag set to 'Y' where a public company offers to exchange new securities for its outstanding securities. Only those offers seeking to exchange consideration for equity, or securities convertible into equity, are covered in the M&A database. See EXCHANGE OFFER DATABASE for transactions involving debt. EXTEN Number of Tender Extensions: Number of times, which the tender offer was extended. SEE DEXP FAM Target Company is Family-Owned/Controlled Flag: Yes/No flag set to 'Y' where at least a family or group of families controls 20% of the target company. If either a founding family or a non-founding chairman owns a substantial stake (defined as 20 %), FAM is indicated. ESOP Employee Stock Ownership Plan Flag: Yes/No flag set to 'Y' where acquiror includes an Employee Stock Ownership Plan of the target company. See also EMP (Employee Participation Flag), where the acquiror includes employees of the target company. FLIP Flipover Flag: Yes/No flag set to 'Y' when a flipover-type poison pill has an effect on a merger proposal. LOCKA Asset Lockup Flag: Yes/No flag set to 'Y' where the lockup involves an option to purchase target company assets, usually at a bargain price. LOCKS Stock Lockup Flag: Yes/No flag set to 'Y' if the lockup involves an option to purchase target or acquiror company stock, usually at bargain price. LOCKUP Lockup Flag: Yes/No flag set to 'Y' where the target grants the acquiror (or acquiror grants the target) an option to purchase stock or assets (e.g. a division or subsidiary) in order to make a competitive bid more expensive or less attractive. LOCKUP is noted on friendly deals when it is granted.MENUDEFTECH Defensive Techniques Code: Code for the defensive technique used by the target: MERCHANT Financial Acquiror Flag: 'Y' indicates that the acquiror is a financial company (buyout firm, venture capital company, merchant bank, commercial bank, etc.) and is acquiring more than 50% of the target, the target's main industry is non-financial and it must be acquired for financial rather than strategic reasons. MGMT Management Participation Flag: 'Y' indicates that the management of the target company is taking an equity interest in the target company as part of the acquisition. MOE Merger of Equals Indicator: Flagged 'Y' when the target and acquiror are considering their merger a Merger of Equals. Merger of Equals indicates that the target and acquiror in a stock swap transaction have approximately the same market capitalization, and the ownership of the new entity will be owned roughly 50/50 by the target and acquiror shareholders. Both companies should also have close to equal representation on the board of the new company. In almost all Merger of Equal's deals the articles will specifically state that it is a Merger of Equals. OMKT Open Market Purchase Flag: 'Y' indicates that stock was purchased in the open market rather than from a third party through a privately negotiated transaction or public securities offering. The transaction must be a Stake Purchase or a Repurchase (see Deal Type). POIS Poison Pill Flag: Yes/No flag set to 'Y' where the target company invokes a poison pill or the existence or enactment of a poison pill discourages the potential acquiror. Poison pill is indicated only if it affects the transaction. PROXYF Proxy Fight Flag: Yes/No flag set to 'Y' where the hostile bidder launched a proxy fight for control of the target company's board. PURPOSE_CODE Purpose Code: Three-letter code relating to the purpose/reason for a transaction. (E.g. PRD = allow to offer new products and services). RD Related Deals Flag: Yes/No flag set to 'Y' when 2 or more deals exist which cause or effect each other including, but not limited to, competing bids, divestitures or seeking buyers connected with a merger, defensive transactions, stakes before acquisitions and 2 or more deals having a combined total value. All related deal history events are displayed in one history file. REVERSE Reverse Takeover Flag: 'Y' indicates a merger in which the acquiring company offers more than 50% of its equity as consideration offered to the target company resulting in the target company becoming the majority owner of the new company. SCORCH Scorched Earth Flag: Yes/No flag set to 'Y' where the target company adopts strategies such as selling off assets in order to make itself a less attractive takeover target. Scorched earth is noted on the deal in which it is used as a defense. SFD Debt Securities Flag: Yes/No flag set to 'Y' when the transaction was financed in some portion by debt securities. SFF Foreign Lender Indicator: Yes/No flag set to yes if one or more providers of funds is a foreign bank, finance company or subsidiary in relation to the acquiror's location. SQUIRE White Squire Flag: 'Y' indicates when the target company attempts to thwart an unsolicited or hostile bid by selling a block (less than a majority) of shares (usually convertible preferred with special voting rights) to a friendly third party. A 'Squire' is very similar to a 'White Knight', the only difference being that the 'Squire' only acquires a blocking minority stake and does not acquire a majority. The result is the same however, the hostile bid is thwarted. SWAP Stock Swap Flag: 'Y' indicates a transaction in which the acquiring company exchanges equity in itself for equity in the target. The acquiror must be acquiring at least 50% of the target's equity or be acquiring the remaining interest up to 100% of the target's equity, and at least 50% of the consideration offered must be in the form of equity. SWEEP Sweeping Purchase Flag: Yes/No flag set to 'Y' where acquiror makes stake purchase(s) of all available shares with intention of gaining control. TEND Tender Offer Flag: Yes/No flag set to 'Y' when a tender offer is launched for the target. A tender offer is a formal offer of determined duration to acquire a public company's shares made to equity holders. The offer is often conditioned upon certain requirements such as a minimum number of shares being tendered. TERM Termination Fee Flag: Yes/No flag set to 'Y' where the target or acquirer has agreed to a termination fee agreement whereby a failure to consummate the transaction results in a payment of one party to another. Value of Termination Fee in Millions. TLOCKUP A Yes/No Target Lockup Agreement Flag. Set to 'Y' when the target is the owner of a lockup agreement. UNSOLICITED Deal Started as Unsolicited Flag: Yes/No flag set to "Yes" when acquiring company makes an offer for another company without prior negotiations. VPLAN Vote Plan Flag: Yes/No flag set to 'Y' when there is an attempt by the target to reduce the voting power of large shareholdings held by hostile raiders, usually through preferred stock dividends with different voting rights for different holders. Vote Plan is a type of poison pill. If vote plan = 'Y' then poison = 'Y'. WALKAWAY_FLAG True or False==Paper Discussion==
| Friendly vs. Hostile || SDC|| D.N.E.|-| CEO Overconfidence || Execucomp || malmendier_Tate
|}
Boom - Created. Code in E:\McNair\Projects\Winner's Curse\Data\SQL\SDC_TABLE. Final variable in table SDCno_boom.
Competition - Created. Code in E:\McNair\Projects\Winner's Curse\Data\SQL\CRSP_TABLE. Final variable in table competition final.
IT Fixed Effect - Create an indicator variable taking the value one if the target has a NAICS code listed on page 31 of the article.
Idiosyncratic Volatility - RMSE, it should already be up on the database.
Industry Fixed Effect - Created. Jake, please update this.
Momentum - To control for systematic variations in return over time. The summation of the NYSE-Nasdaq-AMEX composite market return (as
calculated by CRSP) over the event window
Private Financial Data - Look at [https://wrds-web.wharton.upenn.edu/wrds/query_forms/variable_documentation.cfm?vendorCode=CRSP&libraryCode=crspa&fileCode=ccmfunda&id=bspr]. The variables takes value 1 when the balance sheet is not publicly available.
Percent Cash - Possibly this is going to be the PCT_CASH variable in SDC. This should be the PC_CASH field in the SDC table.
Previous Acquisitions - The number of previous acquisitions (from 1985 on) of privately-held firms completed by the acquirer prior to its announcement of the acquisition.
Tobin's Q: The ratio of market-to-book value of assets. This would be MKVALT/ AT in the SDC table.
Q) Is CUSIP in RiskMetrics current or historical? How can I use it to merge with CRSP?
A) The Legacy files have the current CUSIP. With each update, WRDS updated the historical data with the latest value. Starting with the new Director and Governance files, we no longer modify the historical data.
To merge any of these datasets with CRSP, you can join on the NCUSIP field. This will match a single Permco (company identifier), but you may still need to select the primary Permno because some companies issue more than 1 security.
Merging EXECUCOMP AND IRRC:
Q) What is the best way to merge Execucomp and IRRC (director and governance) databases? I understand they both have CUSIP, but that matching with CUSIPs isn't always ideal since the CUSIP can change over time for the same firm.
A) All Execucomp (CUSIP), IRRC Governance (CN6), and IRRC Directors (CUSIP) CUSIPs are header cusips, in that they reflect the most recent CUSIP that the company has had. There are however 2 main differences between Execucomp's CUSIP and IRRC's CUSIP and CN6:
1. While Execucomp uses 8-digit CUSIP, both IRRC datasets have 6-digit CUSIPs. Therefore, you need to use a SAS function like "substr" to take the first 6-digit of Execucomp CUSIP before merging it to IRRC data. ex: cusip6 = substr(CUSIP,1,6);
2. While header convention reflect "most recent" value of an identifier variables, it is dependent on the date of update of each dataset. Therefore, for CUSIPs that change in between the time that both databases are updated, you might find some discrepancy. To overcome this issue, we recommend that you make use of the CRSP name files (ex: stocknames), that contains all historical CUSIPs that a company has had.
Also, good to know:
Best Identifier to Use in RiskMetrics Directors- Changes to Identifier between Legacy and Current Files
1. The primary identifier in the current dataset is year-ticker-director_detail_id. Ticker is better populated than cusip in earlier years, but should be about the same in the latest years. For the legacy directors, director_detail_id was in use for some years and legacy_director_id for others.
2. Cusips in the legacy file are "header". With each update, WRDS modified all previous cusips for a company to match the latest. Although it may help in some cases, it may hurt in others and it is not quite the way the data was delivered. Starting with the new directors file, Cusips appear in the file as they were delivered (effectively making them historical going forward). Cusips in the legacy data were also uniformly truncated to 6 digits for consistency. The new file reports them as they are delivered, typically (but not always) 9 digits.
3. Tickers were not changed over time and appear as they were delivered. One example is legacy company id (legacy_pps_id) 25 has tickers ASN and IKN.
4. Each time IRRC - ISS - Riskmetrics was acquired, new identification methods were introduced. This is why you see legacy company and director IDs. Neither is more correct, we recommend choosing the most populated one for the years in which you are working.
5. Constructing a complete time series in the directors data is not easy. There is no single variable that is populated for all companies and all years.
6. Be very careful when combining the legacy data (through 2006) and the current data (from 2007). They were separated because the collection methods and meaning of some variables changed.
==Paper Discussion==
==Importing the CRSP data into the `winner' database (Amir) ==
Two important files:
Project --> Winner's Curse --> Data --> SQL --> CRSP_NOTES
Project --> Winner's Curse --> Data --> SQL --> CRSP_CODES
Data file is located in: E:\McNair\Projects\Winner's Curse\Data\CRSP-Oct10-c30cc89e52b70545-1.txt
Issue 1: The text file is 8 GB large and there's no way to open it in Textpad. I'll try to read the file in LogExpert which seems to do a neat job in in opening large files. Otherwise, I'll try to read the first few lines in the terminal.
Update: I managed to open the file in LogExpert. However, extremely inefficient to scroll over the file.
I copied the file to Z:\WinnersCurse\CRSP-oct10
Entered the following command in the terminal to read the header:
head -1 CRSP-oct10.txt
CREATE TABLE CRSP (
PermNo int,
date date,
EXcode int,
SIC int,
NCUSIP varchar(10),
Ticker varchar(10),
Name varchar(100),
NAICS int,
PrimEx varchar(1),
PERMCO int,
CUSIP varchar(12),
Price real,
VOL int,
RET real,
ShOut int,
trade int,
EQRET real,
VRET real
);
We have unexpected data types in few columns. We'll first start by copying data into a table named CRSPtmp with varchar type for most of the fields.
CREATE TABLE CRSPtmp (
PermNo varchar(10),
date date,
EXcode varchar(10),
SIC varchar(10),
NCUSIP varchar(10),
Ticker varchar(10),
Name varchar(100),
NAICS varchar(10),
PrimEx varchar(1),
PERMCO varchar(10),
CUSIP varchar(12),
Price varchar(15),
VOL varchar(10),
RET varchar(10),
ShOut varchar(10),
trade varchar(10),
EQRET varchar(10),
VRET varchar(10)
);
\COPY crsptmp FROM '/bulk/WinnersCurse/CRSP-oct10.txt' WITH DELIMITER AS E'\t' HEADER NULL AS '' CSV
-- COPY 64614281
Next, to create an index on CUSIP:
CREATE INDEX CUSIPIndex
ON crspfinal(CUSIP);
===CRSP2 Variable Issues (Jake)===
permno-
date-
excode -
sic - letter "Z", value 711 (most are 4 digits),
ncusip -
ticker -
name -
naics -
primex -
permco -
cusip -
Price - Null values, negative numbers,
vol - null values
ret - null values, letter "B" as value multiple times, letter "C",
11332 rows were removed as a result of our regular expression use.
=== Normalizing SDC data ===
Make sure that the first line of the data file starts with the column names and column name are not preceded by empty lines. Also, remove the summary/report lines at the bottom of the text file.