The Importance of Blockholder Heterogeneity: Security Market Effects and Follow-On Activities

2018 ◽  
Vol 54 (1) ◽  
pp. 101-153 ◽  
Author(s):  
Jim Hsieh ◽  
Tao-Hsien Dolly King
Keyword(s):  
Hedge Funds ◽  
Security Market ◽  
Target Firm ◽  
Market Effects ◽  
Bond Returns ◽  
Target Firms ◽  
Performance Consequences ◽  
Private Placements ◽  
And Performance

Recent research on blockholders focuses on activist hedge funds and documents positive stock but negative bond returns. This study investigates the role of blockholder heterogeneity on security market effects and target firm follow-on activities across three important dimensions: identity, motive, and purchasing method. We show that target firms’ security returns and post-acquisition activities strongly correlate with blockholder heterogeneity. Further, bond returns are significantly positive for firms with blockholders’ debt-assistance motive while both stock and bond returns are significantly negative in private placements. Overall, our findings highlight the importance of blockholder heterogeneity on the valuation and performance consequences in block acquisitions.

scholarly journals The Urge to Merge: The Role of Governance Structures in Mergers and Acquisitions

1970 ◽  
Vol 13 (2) ◽  
pp. 151-166
Author(s):  
Catherine Daily ◽  
Dan Dalton
Keyword(s):  
Decision Making ◽  
Mergers And Acquisitions ◽  
Board Of Directors ◽  
Board Composition ◽  
Outside Directors ◽  
Target Firm ◽  
Target Firms ◽  
The Board Of Directors ◽  
The Relationship

The 1990s have witnessed merger and acquisition activity which rivals that of the 1980s "merger mania." As firms continue to consolidate either within industries or across industries it is appropriate to investigate those aspects of a target firm which might attract a bidder. The board of directors, a central decision-making body in the corporation, may provide insights into this process. This study investigates the relationship between board composition and size and the incidence of a firm being targeted for a merger or acquisition. Results of a logistic regression analysis of a matched set of target firms and firms not targeted for merger or acquisition reveal that target firms have higher proportions of independent outside directors and more total numbers of directors. Moreover, we find that target firms have greater exposure to institutional investors.

Improving Returns on Stock Investment through Neural Network Selection

2006 ◽  
pp. 152-164 ◽  
Author(s):  
Tong-Seng Quah
Keyword(s):  
Neural Networks ◽  
Conceptual Development ◽  
Bankruptcy Prediction ◽  
Security Market ◽  
Stock Selection ◽  
Financial Variables ◽  
Stock Investment ◽  
And Performance

Artificial neural networks’ (ANNs’) generalization powers have in recent years received admiration of finance researchers and practitioners. Their usage in such areas as bankruptcy prediction, debt-risk assessment, and security-market applications has yielded promising results. With such intensive research and proven ability of the ANN in the area of security-market application and the growing importance of the role of equity securities in Singapore, it has motivated the conceptual development of this work in using the ANN in stock selection. With their proven generalization ability, neural networks are able to infer the characteristics of performing stocks from the historical patterns. The performance of stocks is reflective of the profitability and quality of management of the underlying company. Such information is reflected in financial and technical variables. As such, the ANN is used as a tool to uncover the intricate relationships between the performance of stocks and the related financial and technical variables. Historical data, such as financial variables (inputs) and performance of the stock (output) is used in this ANN application. Experimental results obtained thus far have been very encouraging.

scholarly journals Internal Drivers and Performance Consequences of Small Firm Green Business Strategy: The Moderating Role of External Forces

2015 ◽  
Vol 140 (3) ◽  
pp. 585-606 ◽  
Author(s):  
Leonidas C. Leonidou ◽  
Paul Christodoulides ◽  
Lida P. Kyrgidou ◽  
Daydanda Palihawadana
Keyword(s):  
Small Firm ◽  
Business Strategy ◽  
Performance Consequences ◽  
Green Business ◽  
And Performance ◽  
External Forces ◽  
Moderating Role ◽  
Internal Drivers

Post-acquisition Performance Analysis of Indian Target Firms: The Role of Deal Characteristics

2018 ◽  
Vol 66 (3-4) ◽  
pp. 250-269
Author(s):  
Sheeba Kapil ◽  
Gaurav Barick
Keyword(s):  
Method Of Moments ◽  
Target Firm ◽  
Acquisition Performance ◽  
Financial Variables ◽  
Stock Market Reaction ◽  
Significant Difference ◽  
Target Firms ◽  
Generalised Method Of Moments ◽  
The Impact

The aim of this article is to identify and determine various dimensions of deal characteristics affecting the post-acquisition performance of Indian target firms. Available researches have focussed on the stock market reaction as the indicator of target firm performance. Nonetheless, various determinants are found to affect the post-acquisition performance of target firms. Bearing that in mind, this article focusses on the significance of deal characteristics while assessing the performance of the Indian target firms post-acquisition. The article attempts to analyse the post-acquisition performance of target firms independent of the acquirer firm to get a more appropriate perception of their position. The change model, generalised method of moments (GMM) model and the regression model has been employed to assess the changes in operating performance, analyse the importance of financial variables in post-acquisition performance and study the impact of deal characteristics in the post-acquisition performance of the Indian target firms. The outcomes reveal that there has been a significant difference in the improvement of targets depending on whether it has been taken over by a domestic acquirer or inbound acquirer.

A Review of Hedge Fund Activism: Impact on Shareholders vs. Stakeholders

2021 ◽  
pp. 282-317
Author(s):  
Hadiye Aslan
Keyword(s):  
Hedge Funds ◽  
Hedge Fund ◽  
Spillover Effects ◽  
Empirical Literature ◽  
Target Firm ◽  
Market Strategy ◽  
Target Firms ◽  
Product Market Strategy ◽  
Hedge Fund Activism ◽  
Rival Firms

This chapter reviews the growing empirical literature on shareholder activism by hedge funds, summarizing the sources and nature of the activist data and examining the evidence on target firm outcomes. Target firms do not exist in a vacuum, however; they have industry competitors, suppliers, customers, debtholders, and employees. Hedge fund activists often demand a reformulation of the target firm’s product market strategy to enhance its ability to earn inframarginal profits. This positive strategic effect may be especially significant for target firms that are economically distressed and facing predatory moves from deep-pocketed rival firms to induce exit. The putative significant effects of hedge fund activism on targets should generate spillover effects on their stakeholders. The chapter considers these spillover effects in a number of well-defined categories: industry rivals, customers, suppliers, debtholders, and employees.

scholarly journals Mergers and acquisitions in emerging markets: What drives absorptive capacity in target firms?

2021 ◽  
Vol 52 (1) ◽  
Author(s):  
Sherilee Pillay ◽  
Manoj D. Chiba ◽  
Abdullah Verachia ◽  
Morris Mthombeni
Keyword(s):  
Emerging Markets ◽  
Absorptive Capacity ◽  
Emerging Market ◽  
Knowledge Flow ◽  
Target Firm ◽  
Strategic Intent ◽  
Acquiring Firms ◽  
Target Firms ◽  
Operational Processes

Purpose: The purpose of this study was to investigate how knowledge flow and productivity affect the absorptive capacity of target firms in emerging markets.Design/methodology/approach: We used self-administered questionnaires to measure absorptive capacity, knowledge flow and productivity constructs. The sample comprised individuals who were employees of firms that completed acquisitions between 2015 and 2017. The acquisitions were publicly announced and the target firms were all in emerging markets.Findings/results: Firstly, our results confirmed the multidimensional nature of absorptive capacity. Secondly, we found a positive correlation between a target firm’s knowledge flow and productivity and its absorptive capacity. Thirdly, our results indicated that knowledge flow and operational processes will support the introduction and integration of external knowledge into a target firm. Therefore, understanding the absorptive capacity of target firms is central to the ability of new and existing knowledge to be assimilated.Practical implications: The realisation of the strategic intent of an acquisition is dependent on effective knowledge flow, supported by efficient communication and operational processes. The target firm’s absorptive capacity is, therefore, a key consideration for acquiring firms. Understanding this will be useful for firms to consider acquisitions of target firms in emerging markets and could potentially enhance their chances of success.Originality/value: This study contributes to the limited body of research on emerging market merger and acquisition activity. It responds to the call for further research to be conducted on emerging markets and the role of absorptive capacity in realising the strategic intent of acquisitions.

Intermediary Services in the Markets for Technology: Organizational Antecedents and Performance Consequences

2008 ◽  
Vol 29 (7) ◽  
pp. 1003-1035 ◽  
Author(s):  
Ulrich Lichtenthaler ◽  
Holger Ernst
Keyword(s):  
Open Innovation ◽  
Service Providers ◽  
Organizational Boundaries ◽  
Industrial Firms ◽  
Market Inefficiencies ◽  
Innovation Intermediaries ◽  
Performance Consequences ◽  
Organizational Antecedents ◽  
And Performance

The external commercialization of technology assets, e.g. by means of out-licensing, has recently gained in importance. Despite this increase in technology transactions, many industrial firms experience major managerial difficulties in outward technology transfer because of imperfections in the markets for technology. Drawing on a resource-based perspective, we therefore analyse whether firms can overcome market inefficiencies by relying on innovation intermediaries such as consulting companies and internet platforms. We test five hypotheses regarding organizational antecedents and performance consequences of intermediary services with data from 152 firms spanning multiple industries. The empirical findings show that industrial firms need to develop internal competencies of externally leveraging technology. External service providers are a complement rather than a substitute for internal activities. Accordingly, the role of technology intermediaries as general facilitators of interorganizational technology transactions has to be questioned. On this basis, the study has major implications for research into intermediaries, technology exploitation, licensing, open innovation and organizational boundaries.

scholarly journals Merger announcements and share price return: The role of the relationship between acquiring and target firms

1988 ◽  
Vol 19 (1) ◽  
pp. 1-10 ◽  
Author(s):  
R. C. Van Den Honert ◽  
G. D.I. Barr ◽  
J. F. Affleck-Graves ◽  
G. Smale
Keyword(s):  
Shareholder Wealth ◽  
Share Price ◽  
Wealth Effects ◽  
Target Firm ◽  
Distribution Of Wealth ◽  
Acquiring Firms ◽  
Average Abnormal Return ◽  
Target Firms ◽  
The Relationship

The authors examine, in a cumulative average abnormal return (CAAR) framework, the effect of four easily identifiable features of merger activity on acquirer/target shareholder wealth. The features considered are the relatedness of the acquiring and target firms involved in the merger, the relative sizes of the acquirer and target, the prior control position, and the medium of exchange. The results indicate that the relatedness of the acquirer and target firm and the prior control position are strong factors in determining the distribution of any wealth effects between the shareholders of the target and acquiring firms. The size and the medium of exchange are shown to be weaker factors in determining the distribution of wealth. In all cases it is seen that the shareholders of acquiring firms do not tend to benefit in the short term from the merger while those of the target firms show significant gains.

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