Stefan Morkötter
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Prof. Dr.
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Morkötter
First name
Stefan
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stefan.morkoetter@unisg.ch
Phone
+65 68507 338
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Publication

Households’ Pecking Order of Debt and the Pricing of Asset-Backed Securities

2024 , Roland Füss , Dominik Meyland , Stefan Morkötter

This paper studies the role of households' pecking order of debt in the pricing mechanism and rating migration of U.S. consumer debt asset-backed securities (ABS). Our empirical results show that the household's delinquency on mortgage and auto loan increases spreads of ABS using these loan types as collateral. However, an increase in delinquency on credit card and student loans often lower ABS spreads in other types of collateral. We argue that delinquencies on these types of loans in a household's loan portfolio provide liquidity to other loans. In contrast, rising delinquencies on mortgages, which are typically the first to be repaid in the pecking order, are an indicator of a severe shock that spills over to other loan types, triggering a simultaneous increase in ABS spreads. Furthermore, we find for residential mortgage-backed securities (RMBS) a lower probability of future rating downgrades in times of high mortgage delinquency. In general, ratings are adjusted according to changes in the business cycle. Our empirical results suggest that liquidity provision causes a larger downgrade probability, and thus, is not sufficient to avoid future downgrades.

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Publication

Conflicts of Interest and the Role of Financial Advisors in M&A Transactions: Empirical Evidence from the Private Equity Industry

2015 , Morkötter, Stefan , Wetzer, Thomas

Financial advisors play an important role in M&A transactions. Private equity (PE) firms, in turn, are highly sought-after clients for financial advisors as they promise lucrative business due to their frequent engagements in acquisitions. We find that PE firms pay, on average, less for portfolio companies when their sell-side advisor has worked for the acquiring PE firm on the buy-side in past transactions. We refer to this as indirect relationships and argue that conflicts of interest be-tween financial advisors and their clients are the main driver for our results. Strategic acquirers do not benefit from these previous indirect relationships altogether.

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Do Private Equity Funds Always Pay Less? A Synergy-Related Explanation Based on Add-on Acquisitions

2015-10 , Morkötter, Stefan , Wetzer, Thomas

We assess the pricing of transactions undertaken by private equity (PE) funds in comparison to the transactions of strategic acquirers and sellers and focus on synergy gains as an explanatory factor. Controlling for company and deal characteristics, we show that PE funds pay 20% less, on average, than strategic buyers for comparable target corporations (we refer to this as the PE discount). Supplementing the existing literature on the PE discount in M&A transactions, we show that in add-on transactions, this PE discount disappears. When PE funds benefit from synergies, they are willing to pay the same price level as strategic acquirers would do in comparable transactions. In line with this synergy-related explanation, we find that PE funds sell their portfolio companies to strategic acquirers at prices comparable to those of strategic sellers. In divestitures to other PE funds (secondary deals), the PE discount prevails.

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