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Vladimir Vladimirov

University of Amsterdam
Finance Group
Plantage Muidergracht 12
1018 TV Amsterdam, Netherlands
Tel: +31 20 5257317
E-mail: vladimirov AT uva.nl

HOME   CV   RESEARCH   TEACHING
 
FINANCING BIDDERS IN TAKEOVER CONTESTS
Journal of Financial Economics 117(3), 2015, 534-557.
EFA Annual Meeting (Copenhagen)

This paper argues that endogenizing the choice of financing for cash bids is just as important as endogenizing the payment method in takeovers. The paper shows that acquirers issue equity to finance their cash bids only if they lack access to competitive financing. This leads to underbidding and lower takeover premiums. The opposite holds for debt financing, which leads to overbidding. Endogenizing the payment method reveals that equity bids carry lower premiums than cash bids financed at competitive terms. The model's insights find preliminary empirical support and could help explain existing evidence, which seems at odds with prior theory.

 
INDIRECT COSTS OF FINANCIAL DISTRESS AND BANKRUPTCY LAW: EVIDENCE FROM TRADE CREDIT AND SALES with Zacharias Sautner
Review of Finance 22(5), 2018, 1667-1704.
AFA Annual Meeting (Philadelphia), EFA Annual Meeting (Bergen)

We argue that stronger debt enforcement in bankruptcy can reduce indirect costs of financial distress: (i) by increasing the likelihood of restructuring outside bankruptcy and (ii) by improving the recovery rate of stakeholders, such as trade creditors, through explicit legal provisions. Consistent with these predictions, we find that when debt enforcement is stronger, financially distressed firms are less exposed to indirect distress costs in the form of reduced access to trade credit and forgone sales. We document these effects in a panel of firms from 40 countries with heterogeneous debt enforcement characteristics and in differences-in-differences tests exploiting several recent bankruptcy reforms.

 
GROWTH FIRMS AND RELATIONSHIP FINANCE: A CAPITAL STRUCTURE PERSPECTIVE
with Roman Inderst
Management Science 65(11), 2019, 5411-5426.
AFA Annual Meeting (Philadelphia)

We analyze how relationship finance, such as venture capital and relationship lending, affects growth firms' capital structure choices. We show that relationship investors that obtain a strong bargaining position due to their privileged information about the firm, optimally cash in on their dominance by pushing it to finance follow-up investments with equity. The firm underinvests if its owner refuses to accept the associated dilution. However, this problem is mitigated if the firm's initial relationship financing involves high leverage or offers initial investors preferential treatment in liquidation. By contrast, if initial investors are unlikely to gain a dominant position, firms optimally lever up only in later rounds. Our implications for relationship and venture capital financing highlight that the degree of investor dominance is of key importance for growth firms' capital structure decisions.

 
(NON-)PRECAUTIONARY CASH HOARDING AND THE EVOLUTION OF GROWTH FIRMS
with Arnoud Boot
Management Science 65(11), 2019, 5290-5307.
AFA Annual Meeting (San Francisco), AEA Annual Meeting (Boston)

We analyze whether growth firms should delay current investment to hoard cash in order to reduce dilution from external financing. This hoarding motive is the natural counterpart to saving cash as a precaution to help secure funding for future investment opportunities. However, the two motives lead to fundamentally different implications for hoarding and for how cash interacts with key financial and investment decisions. In particular, our paper contributes to understanding why firms choosing private over public financing hoard less, and why product market competition has an ambivalent impact on the public-private choice.

 
WORKER RUNS
with Florian Hoffmann
WFA Annual Meeting (Huntington Beach), Cambridge Corporate Finance Theory Symposium. This paper emerged from an older paper entitled "Financing Skilled Labor"

The voluntary departure of hard-to-replace skilled workers worsens firm prospects, thus, increasing remaining workers' incentives to leave. We develop a model of collective turnover in which firms design compensation to limit the risk of such "worker runs." To achieve cost-efficient retention, firms may use fixed or dilutable variable pay -- such as stock option/bonus pools -- that promises remaining workers more when others leave but gets diluted otherwise. The optimal mix of fixed and dilutable pay depends on firms' relative risk exposure and their financial constraints. Compensating (identical) workers differently and financing investments with debt can improve collective retention.

 
NEGOTIATING COMPENSATION
with Florian Hoffmann
WFA Annual Meeting (Huntington Beach), Cambridge Corporate Finance Theory Symposium. This paper emerged from an older paper entitled "Financing Skilled Labor"

We investigate compensation design in tight labor markets. With private information about firm productivity, firms prefer competing for workers by raising fixed wages. However, workers in better bargaining positions often prefer negotiating for higher bonuses or option pay. We characterize when such differences in preferred compensation structure occur and show that they determine whether workers extract higher compensation by negotiating as opposed to attracting additional job offers. Our analysis of negotiations and competition with endogenous compensation structure has implications for firms' external financing needs and investor base and extends to other applications such as mergers and acquisitions.

 
CONTRACT LENGTH AND SEVERANCE PAY
AFA Annual Meeting (Philadelphia)

Renewable fixed-term contracts are widespread in executive compensation. This paper studies why these contracts are optimal, what determines their length, and how that length affects managerial behavior. The model relates a contract's length to the period during which dismissing a manager triggers severance pay. Though longer contracts are more costly to terminate, their severance protection can discourage managers from trying to avoid replacement through window dressing or concealing soft information. Thus, the board's choice of contract length balances higher replacement costs with a higher likelihood of window dressing. The predicted determinants of contract length and severance pay are supported empirically.

 
CO-OPETITION AND DISRUPTION WITH PUBLIC OWNERSHIP
with Arnoud Boot
SFS Cavalcade (Yale), EFA Annual Meeting (Warsaw)

Do mandatory disclosure requirements make public firms less disruptive and competitive? We offer a new perspective by showing that mandatory disclosure helps when firms engage in "co-opetition" --- a strategy of competing on some dimensions while avoiding competition on others. Co-opetition can elevate profitability, lower financing costs, and encourage disruption. This benefit is most pronounced in growth industries where rivals also pursue disruption. The cost is that cooperation on existing technologies may erode commitment to disruptive investments. This cost mainly encumbers intermediately-attractive investments in mature industries. Our insights explain evidence of higher profitability in public firms following stricter disclosure requirements.

 
HOW FINANCIAL MARKETS CREATE SUPERSTARS
with Spyros Terovitis

We show that uninformed speculative trading inflating a firm's stock price can help the firm "fake it till it makes it" by attracting high-quality stakeholders that would not have joined otherwise. Speculators profit from targeting intermediately-transparent firms with highly uncertain prospects, operating in "normal" (neither hot nor turbulent) markets. Unlike speculation inflating prices, short-selling scaring off stakeholders is often unprofitable even when traders have negative information about the firm. Overall, speculative trading is more likely to benefit than harm targeted firms. Uninformed investors can benefit from inflating firms' valuations also in private markets.

 
NON-STANDARD ERRORS
with 300+ co-authors, coordinated by Albert Menkveld. Motivated by my work on how speculative trading distorts efficiency, I participated in one of the research teams showing that market efficiency has declined.

In statistics, samples are drawn from a population in a data-generating process (DGP). Standard errors measure the uncertainty in sample estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence-generating process (EGP). We claim that EGP variation across researchers adds uncertainty: non-standard errors. To study them, we let 164 teams test six hypotheses on the same sample. We find that non-standard errors are sizeable, on par with standard errors. Their size (i) co-varies only weakly with team merits, reproducibility, or peer rating, (ii) declines significantly after peer-feedback, and (iii) is underestimated by participants.

 
BUYING A SEAT AT THE TABLE: BANKRUPTCY LAW AND DISTRESS INVESTING
with Mike Burkart and Samuel Lee
EFA Annual Meeting (Milan)

Private equity and hedge funds are involved in the vast majority of large bankruptcy cases, often contributing to more efficient reorganizations. We show that bankruptcy provisions allowing multiple claims classes to file a reorganization plan in bankruptcy play a crucial role. Such provisions offer activist investors multiple entry points in pre-bankruptcy trading through which they can subsequently affect bankruptcy reorganization. The resulting uncertainty about which distressed claims activists will target in pre-bankruptcy trading mitigates "free-rider" pricing, which would otherwise make acquiring such claims unattractive. Distressed firms with more complex capital structures and a high likelihood of entering bankruptcy are particularly attractive for activists. Our predictions rationalize the main stylized facts about distress investing.

 
WHY DO INSTITUTIONAL INVESTORS INVEST THROUGH INTERMEDIARIES?

Institutional investors, such as pension funds, often lack direct access to deals they want to invest in, forcing them to spend billions of dollars on intermediation fees. This paper explains intermediaries' better access to deals with their ability to maintain a reputation for isolating firms from investors' potentially differing strategic objectives. Maintaining such a reputation requires intermediaries to charge non-trivial fees, with competition putting upward pressure on fees. While institutional investors' in-house teams may also develop a reputation, they find it harder. When they do, the proportion of directly invested capital is "wave-shaped" in investors' size. Evidence from institutional investors' investments in alternative assets supports the model's predictions.