Published Papers

Fathollahi, M., Harford, J. and Klasa, S., 2022. Anticompetitive effects of horizontal acquisitions: The impact of within-industry product similarity. Journal of Financial Economics, 144(2), pp.645-669.

Abstract:

Theory predicts that horizontal acquisitions can effectively increase incumbent firms’ market power in concentrated industries with high product similarity. Using a novel measure for industry product similarity, we show that in such industries firms’ propensity to make horizontal acquisitions is greater and that the acquisitions result in more positive announcement returns for the acquirer and rival firms and in a larger premium paid for the target. Also, the deals harm dependent customer and supplier firms and they are more likely to be challenged by antitrust authorities. Overall, by emphasizing the importance of product similarity, our results help explain mixed empirical findings on whether horizontal acquisitions are used to reduce competition intensity.

Selected Working Papers

“Employee Flight Risk and Capital Structure Decisions” (with Sandy Klasa, and Hernán Ortiz-Molina).

Conferences and seminars:

HEC Montréal (May 2023), Louisiana State University (Apr 2023), Southern Methodist University (Nov 2019), University of Oklahoma (Nov 2019), University of Arkansas (Nov 2019), University of Delaware (Nov 2019), University of Missouri (Nov 2019), Southern Finance Association (Nov 2019), Financial Management Association (Oct 2019), University of Arizona (Sep 2019), Eastern Finance Association (Apr 2019)

Abstract:

We examine how the risk that a firm will suffer productivity losses and incur significant search and training costs when some of its mobile workers leave - employee flight risk - affects its capital structure decisions. We proxy for this risk with the ex-ante cross-industry labor mobility of a firm’s workers using a novel dynamic textual measure for this mobility based on network centrality. Firms facing higher employee flight risk maintain lower debt ratios, hold more cash, and pay less dividends. This effect is stronger for firms with limited access to external capital, that are in labor-intensive industries, or with a larger number of workers who are skilled, in managerial occupations, or who have lower costs of switching employers. Conversely, the effect is weaker for firms in strongly performing industries and subsequent to an exogenous increase in the supply of workers. Our evidence implies that employee flight risk, which is especially acute during financial distress, leads to more conservative financial choices because it increases a firm’s expected costs of financial distress.

“How Robots Can Impact Local Government Public Financing” (with Sandy Klasa, Xi Li, and Hernán Ortiz-Molina).

Conferences and seminars:

·       IÉSEG School of Management, France (May 30, 2024), University of North Dakota (April 12, 2024), University of Oklahoma, Finance Seminar (April 5, 2024), University of Oklahoma, 3M Presentation (Feb 2, 2024), University of Arizona, Finance Department (March 18th, 2022), University of Arkansas (April 1st, 2022), University of North Texas (April 8th, 2022), University of Arizona, MIS Department (April 15th, 2022)

Abstract:

We study the impact of robot adoption on public finance outcomes for local U.S. governments by instrumenting for this adoption with European industry data on robot adoptions from countries that are ahead of the U.S. in terms of robot adoption, thereby avoiding concerns of local factors in the U.S. driving both robot adoption and outcome variables. A one-standard deviation increase in robot adoption is associated with municipal borrowing costs that are about 8 basis points higher, which leads to annual additional financing costs for municipalities of $2.2  million.  Further, robot adoptions reduce municipalities’ bond ratings. Our results are more pronounced in municipalities with industries in which humans are more likely to be replaced by robots and where municipalities are less creditworthy. Also, our findings are driven by drops in all the sources of own tax revenues, including property, sales, and income taxes. Transfers from the state and federal governments and municipal reductions in major expenditures cannot offset this revenue drop and prevent creditworthiness deteriorations from the declines in employment and wages due to robot adoption.

“Unauthorized Immigrants and Local Government Public Financing” (with Sandy Klasa, Hernan Ortiz-Molina, and Hyuksoon Lim)

Abstract:

We examine how legal restrictions relating to the employment of unauthorized immigrants affect municipalities’ cost of debt by exploiting the staggered adoption of state-level E-Verify laws that require employers to verify the employment eligibility of their workers. We find that the passage of these laws increases municipalities’ cost of debt when they issue new bonds. Our results suggest that laws which make it more difficult for local firms to hire unauthorized immigrants reduce municipalities’ own sources of tax revenues and thereby lower the creditworthiness of local government.