Prof. Andrea Polo receives AXA Research Fund postdoctoral grant

The grant will support Prof. Polo's research on corporate acquisitions, which is part of a broader research agenda on the role of shareholder activism in curbing excessive risk-taking by management.

Professor Andrea Polo (UPF and Barcelona GSE) has been awarded a postdoctoral grant by AXA Research Fund. This organization's competitive grant programs support scientific research that contributes to understanding and prevention of environmental, life, and socio-economic risks.

Professor Polo's project will explore the impact of shareholder voting on corporate acquisitions. He explains that the project is part of a larger research agenda on the role of shareholder activism in curbing curb excessive risk-taking by management.

"After the financial crisis, this issue has been at the core of the policy agenda both in Europe and in the United States," Prof. Polo said. He will collaborate on the project with researchers Marco Becht (Université Libre de Bruxelles, Belgium) and Stefano Rossi (Purdue University, USA). 

"The project will also benefit from exposure to the finance group within the Barcelona GSE community," Prof. Polo added. "The faculty working in corporate finance and banking here are a leading group in Europe."

About the project: "Does Shareholder Voting Reduce the Risk of Destruction of Value in Acquisitions?"

Corporate acquisitions can be ruinous and have caused some of the largest losses in shareholder wealth in history. Extensive empirical evidence documents that a large percentage of M&A destroys value for shareholders. Conflicted or overconfident managers take excessive risks in acquisitions.

In this project we study shareholder voting as a governance tool that might reduce the risk of such corporate disasters. Boards and managers are prevented from acting autonomously; they have to seek shareholder approval before taking decisions that can have large and adverse material consequences for the owners of the firm.

Previous empirical studies are inconclusive because shareholder approval in the US is not mandatory; boards can avoid a vote for transactions of any size. We overcome this endogeneity problem by focusing on the UK setting where shareholder voting on significant acquisitions is mandatory. The UK Listing Rules require a vote if the company acquires an asset that is relatively large (exceeding 25% of the value of its existing assets). These acquisitions are called Class 1 transactions. The smaller Class 2 transactions do not require a shareholder vote.

This project will examine the use of Class 1 transactions and its impact on the performance of acquisitions by comparing Class 1 and Class 2 transactions in the UK. We will also compare the performance of Class 1 transactions in the UK and similar acquisitions in the US (bigger than 25%) where the vote is not mandatory. RDD and Diff-in-Diff methodologies will be employed to show the causal effect of voting on shareholder wealth and firm performance.

About Andrea Polo

Andrea Polo (PhD, Saïd Business School at Oxford University) is Assistant Professor at UPF and Barcelona GSE Affiliated Professor. He is Academic Fellow at the Rock Center for Corporate Governance at Stanford University and Associate Fellow at the Saïd Business School at Oxford University. He has also been Research Fellow at the Oxford Institute for Global Economic Development (OxIGED). He is beneficiary of an AXA Research Fund postdoctoral grant. His research interests include corporate finance, corporate governance and banking.