How do human capital assets affect cumulative abnormal returns during merger and acquisition announcements? and, Information asymmetry and focus enhancement in spinoffs

This dissertation is comprised of two stand-alone papers, which study how the market reacts to firm restructuring announcements: (1) mergers and acquisitions and (2) spinoffs. The first paper "How Do Human Capital Assets Affect Cumulative Abnormal Returns During Merger and Acquisition Announcements?" shows that the acquisition of physical assets is very different from acquisition of human capital assets. Holding physical asset size fixed, acquisitions involving more target employees are associated with lower announcement period returns. This effect is strongest in (1) within-industry mergers, (2) cross-region mergers, and (3) mergers involving employees with high-valued skill sets. Each of these conditions suggests M&A transactions that require significant integration of human capital, and therefore, possible employee resistance. This EF effect subsumes the size effect seen in previous literature; that is, controlling for this EF, merger size is unrelated to announcement period returns.;The second paper "Information Asymmetry and Focus Enhancement in Spinoffs" shows that focus-enhancing spinoffs generally increase shareholder value. However, the relationship between focus improvements and cumulative abnormal returns during spinoff announcements is highly nonmonotonic. Splitting data into three groups (most, intermediate, and least focusenhancing), I find that those in the intermediate category have the strongest reactions. This finding constitutes a conundrum, since the most focus-enhancing spinoffs should be particularly value-increasing. It is shown that part of this effect is due to information asymmetry. Firms in the most category are overvalued relative to the other two groups, according to the Rhodes-Kropf et al. (2005) measure.