Mark Mitchell

• CNH Partners

This paper examines the most publicized product change in modern history - Coca Cola’s 1985 withdrawal and subsequent resuscitation of its flagship product. We document a significant wealth decline to Coca-Cola contemporaneous with the introduction of new Coke that is only partially ameliorated by the return of the original formula. We also show th...

The imminent failure of large Wall Street prime brokerage firms during the 2008 financial crisis caused a sudden and dramatic decrease in the amount of financial leverage afforded hedge funds. This decrease in financing resulted from the ex post asymmetrical payoff to rehypothecation lenders – the ultimate providers of financing, through prime brok...

We study three cases in which specialized arbitrageurs lost significant amounts of capital and, as a result, became liquidity demanders rather than providers. The effects on security markets were large and persistent: Prices dropped relative to fundamentals and the rebound took months. While multi-strategy hedge funds who were not capital constrain...

This paper examines the trading behavior of professional investors around 2,130 mergers announced between 1994 and 2000. We find considerable support for the existence of price pressure around mergers caused by uninformed shifts in excess demand, but that these effects are short-lived, consistent with the notion that short-run demand curves for sto...

We examine 82 situations where the market value of a company is less than its subsidiary. These situations imply arbitrage opportunities, providing an ideal setting to study the risks and market frictions that prevent arbitrageurs from immediately forcing prices to fundamental values. For 30 percent of the sample, the link between the parent and it...

This paper analyzes 4,750 mergers from 1963 to 1998 to characterize the risk and return in risk arbitrage. Results indicate that risk arbitrage returns are positively correlated with market returns in severely depreciating markets but uncorrelated with market returns in flat and appreciating markets. This suggests that returns to risk arbitrage are...

As in previous decades, merger activity clusters by industry during the 1990s. One particular kind of industry shock, deregulation, becomes a dominant factor, accountings for nearly half of the merger activity since the late 1980s. In contrast to the 1980s, mergers in the 1990s are mostly stock swaps, and hostile takeovers virtually disappear. Over...

SUBJECT AREAS: Capital structure; interest tax shields. CASE SETTING: 1998; smokeless tobacco producer. UST Inc., the dominant producer of moist smokeless tobacco, is planning a major change in capital structure via a debt-financed stock repurchase program. UST had been widely known for its conservative debt policy and high dividend payout. The pro...

A rapidly growing literature claims to reject the efficient market hypothesis by producing large estimates of long-term abnormal returns following major corporate events. The preferred methodology in this literature is to calculate average multiyear buy-and-hold abnormal returns and conduct inferences via a bootstrapping procedure. We show that thi...

A rapidly growing literature claims to reject the efficient market hypothesis by producing large estimates of long-term abnormal returns following major corporate events. The preferred methodology in this literature is to calculate average multiyear buy-and-hold abnormal returns and conduct inferences via a bootstrapping procedure. We show that thi...

This paper presents clinically-based studies of two acquisitions that received very different stock market reactions at announcement one positive and one negative. Despite the differing market reactions, we find that ultimately neither acquisition created value overall. In exploring the reasons for the acquisition outcomes, we rely primarily on int...

We study industry-level patterns in takeover and restructuring activity during the 1982–1989 period. Across 51 industries, we find significant differences in both the rate and time-series clustering of these activities. The interindustry patterns in the rate of takeovers and restructurings are directly related to the economic shocks borne by the sa...

We study the relation between the number of news announcements reported daily by Dow Jones & Company and aggregate measures of securities market activity including trading volume and market returns. We find that the number of Dow Jones announcements and market activity are directly related and that the results are robust to the addition of factors...

This Article illustrates how financial economics has been and can be applied in securities fraud litigation. Specifically, Mark L. Mitchell andjeffry M. Netter describe an empirical technique (event study) developed by academic financial economists, relate this event study methodology to the relevant areas of securities fraud law, and show its appl...

This article investigates leverage influence on project selection. First, the authors examine 428 mergers (1962-82) and then 389 acquisitions of all types (1982-86). Announcement-period acquirer returns are greater the higher the leverage of the acquirer. A third data set contains 173 acquisitions undertaken during 1978-90 for firms that underwent...

In Basic v. Levinson the Supreme Court ruled that plaintiffs alleging securities fraud need not prove actual reliance on a defendant's misrepresentations so long as they suffered harm trading in a market shown to be "efficient." In an efficient market, the Court reasoned, informed buyers and sellers drive the price of the security to a level reflec...

This paper empirically examines one motive for takeovers: to change control of firms that make acquisitions that diminish the value of their equity. Firms that subsequently become takeover targets make acquisitions that significantly reduce their equity value, and firms that do not become takeover targets make acquisitions that raise their equity v...

An examination of the 1982 Tylenol poisonings reveals stock-market losses to Johnson & Johnson that far exceed direct costs and losses shared with other pain-reliever producers. This evidence provides support for the Klein and Leffler (1981) theory of brand names as quality-assuring mechanisms. Of the subsequent cases, only the 1986 Tylenol poisoni...

We present evidence that a tax bill containing antitakeover provisions proposed by the U.S. House Ways and Means Committee on October 13, 1987 and approved by the Committee on October 15 was the fundamental economic event causing the greater than 10% decline in the stock market on October 14–16, which arguably triggered the October 19 crash. The bi...

On October 29, 1929 the stock market crashed. Congress used the crash as an opportunity to introduce the pervasive regulation of securities markets that exists today. One of many practices for which Congress considered regulation appropriate was short sales. Representative Adolph Sabath of Illinois wanted to ban all short sales' in order to "elimin...