Changes

|TitleHas title=Winner's Curse in Acquisitions (Academic Paper)|AuthorHas author=Ed Egan, Jim Brander|Has RAs=Amir Kazempour, Will Cleland, Jake Silberman|StatusHas paper status=R&RPublished

==WHAT MATTERSSummary==Ed - Review code for SDCv2 & distance

Amir This paper finds evidence consistent with a Winner's Curse in the acquisitions of privately- Literature review of Governance measures (Iheld firms. This Winner'll work on this on Friday around 2:45 -Amir) s Curse is aggravated when there are more potential bidders and/or greater information asymmetries.

Will The paper was accepted for publication in the Quarterly Review of Economics and Finance in February of 2017. ==Dbase Notes==  - Clarify which 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 pub/priv (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 use on Malmendier & Tate Flatter ABR2 --Abnormal returns (plus momentum) AbRet --CARs 30950 ------------- Turnover --NEEDS REWORKING tobinq -- CPI Below that is supersceeded --GOV_Table and join your part of the databaseGOVERNANCE_NOTES.txt --Malmendier_tate.sql

| Boom || SDC Compustat || tobinxcompxsdcboom

| Sales || Compustat || SDCA4tobinxcompxsdcboom

==Governance VariablesGovernance_Final Table (Amir)== A list of governance variables UPDATE Nov 22, 3:30 pm: All null entries are now stored as 0. Modified SQL codes can be found in GOV_Table- NULL AS ZERO.sql  Table Name: governance_final Database: winner  Data: ISS (formerly RiskMetrics) - QUERY saved under 'RiskMetrics' in WRDS Coverage:2007-2015 Summary: SELECT COUNT(*) FROM governance_final; count ------- 40005 (1 row)  SELECT COUNT(DISTINCT CUSIP) FROM governance_final; count ------- 2209 (1 row)  SELECT COUNT(DISTINCT(CUSIP, year)) FROM governance_final; count ------- 13332 (1 row)  Text file is saved in: E:\McNair\Projects\Winner's Curse\Governance\RiskMetrics-0b578b37fbb59afa.txt Variable Description is saved in E:\McNair\Projects\Winner's Curse\Governance\Var-Gov-Desc.pdf SQL code file for the table is saved in E:\McNair\Projects\Winner's Curse\Data\GovernanceVARSSQL\GOV_Table.sql The variables are coded as follows: 0 NO 1 YES NULL NULLotherwise see the following file: E:\McNair\Projects\Winner's Curse\Data\SQL\GOVERNANCE_NOTES.txt or here: BLANKCHECK NuLL/YES/NO CARVE_OUT NULL/YES/NO CBOARD NULL/YES/NO CONAME CONFVOTE NULL/YES/NO CUMVOTE NULL/YES/NO CUSIP DUALCLASS NULL/YES/NO FAIRPRICE NULL/YES/NO GPARACHUTE NULL/YES/NO LABYLW NULL/YES/NO LACHTR NULL/YES/NO LEGACYPPS_ID NO ENTRY ---> DROPPED LSPMT NULL/YES/NO LWCNST NULL/YES/NO/UNANIMOUS= 2 MAJ_VOTE_REQUIRED NULL/CAST=1/OUTSTANDING=2 MAJ_VOTE_REQUIREMENT NULL/NO=0/BY-LAWS=1/POLICY=2/CHARTER=3 MAJOR_VOTE_COMM USELESS ---> DROP PPILL NULL/YES/NO RESIGN_REQUIRE NULL/NO=0/ POLICY=1/ BYLAWS-CHARTER=2 SIC varchar(4) TICKER varchar(5) TIER DROPthis UNEQVOTE NULL =0, ELSE =1 DEPOSITORY R/TIME-PHASED/GOLDEN SHARES/FIXED VOTING RI/GOLDEN SHARE/PRIORITY SHA/PRIORITY SHARES/FIXED VOTING/YES/TIME-PHASED VOT/DEPOSITORY RECE OO_BUSCOMP NULL/YES/NO OO_CASHOUT_PA NULL/YES/NO OO_CSA NULL/YES/NO OO_DUTIES NULL/YES/NO OO_FAIRPRICE NULL/YES/NO OO_PP NULL/YES/NO OO_RPROFITS NULL/YES/NO OO_STAKEHOLDER NULL/YES/NO YEAR int RT_ID int MEETINGDATE date COMPANY_ID int STATE LEAVE AS VARCHAR CHARTER_AMEND_VOTEPCNT real FYEND int LAW_AMEND_VOTEPCNT real MTGMONTH int PRICE real SPINDEX LEAVE AS VARCHAR SPL_MEET_VOTEPCNT real SUPERMAJOR_PCNT real WRITTEN_CONSENT_VOTEPCNT real Merging with CRSP: 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.