Financial characteristics of takeover targets: a French empirical evidence

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hicham Meghouar ◽  
Mohammed Ibrahimi
Keyword(s):  
Empirical Studies ◽  
Abnormal Returns ◽  
Control Group ◽  
Subprime Mortgage ◽  
Content Type ◽  
Financial Variables ◽  
Target Firms ◽  
Debt Capacity ◽  
Financial Characteristics ◽  
Available Information

PurposeThe purpose of this research is to highlight the financial characteristics of large French targets which were subject to takeovers during the period 2001–2007 and thereafter deduct the implicit motivations of acquirers.Design/methodology/approachUsing a global sample of 128 French listed companies (64 targets and 64 non-targets), the authors carried out Wilcoxon–Mann–Whitney testing and logistic regression in order to test nine hypotheses likely to discriminate between the two categories of companies (targets and non-targets).FindingsAccording to the results, target firms are more unbalanced in terms of growth resources and less rich in liquidity than their peers. They have unused debt capacity, offer greater opportunities for growth than firms in the control group and present low levels of value creation.Research limitations/implicationsThe main limitation of this study is regarding the sample size, limited by the exclusive use of large firms (deals of over $100m). The scope of this research could be broadened in future by including medium-sized companies.Practical implicationsThe authors believe that their results have two major implications. First, they enable market investors to achieve abnormal returns by investing in predicted targets through a portfolio of high takeover probability firms. Second, CEO of companies that are potentially targeted can assess their takeover likelihood in order to act and to manage such a situation for the benefit of their shareholders.Originality/valueThis research concerns the last wave of takeover prior to the subprime-mortgage financial crisis (2001–2007), a period that has not been sufficiently covered in empirical studies. This research contributes to the existing literature in two main respects. First, the results of this study improve our understanding of motivations for takeovers, particularly in the French context. Second, the introduction of new accounting and financial variables, not previously tested in the literature, enriches the available information concerning the profile of takeover targets.

Best-value supply chains and firms’ competitive performance: empirical studies of their linkage

2015 ◽  
Vol 35 (12) ◽  
pp. 1688-1709 ◽  
Author(s):  
Xun Li ◽  
Qun Wu ◽  
Clyde W. Holsapple
Keyword(s):  
Supply Chains ◽  
Competitive Advantage ◽  
Empirical Studies ◽  
Abnormal Returns ◽  
Competitive Performance ◽  
Content Type ◽  
Long Run ◽  
Best Value ◽  
Multiple Method ◽  
The Impact

Purpose – Best-value supply chains characterized by agility, adaptability, and alignment, have become a crucial strategic means for firms to create and sustain competitive advantage in today’s turbulent environment. The purpose of this paper is to investigate linkage between best-value supply chains and firms’ competitive performance. Design/methodology/approach – In Study 1, survey data from 76 firms is used to test the impact of the three qualities of best-value supply chains on firms’ competitive performance. In Study 2, to test if a firm’s competitive advantage can be sustained through building best-value supply chains, a long-run performance analysis is conducted, which is based on a stock portfolio of firms identified from the American Marketing Association’s annual list of “Supply Chain Top 25.” Findings – The results of Study 1 indicate that the three qualities of best-value supply chains are positively related to firms’ competitive performance. The results of Study 2 show that firms having best-value supply chains generate significant and positive abnormal returns for shareholders over time. Originality/value – This is a multiple-method research, providing two-level empirical evidence to the investigation of theoretical linkage between best-value supply chains and firms’ competitive performance.

scholarly journals Forecasting bank credit ratings

2014 ◽  
Vol 15 (2) ◽  
pp. 195-209 ◽  
Author(s):  
Periklis Gogas ◽  
Theophilos Papadimitriou ◽  
Anna Agrapetidou
Keyword(s):  
Credit Ratings ◽  
Financial Statements ◽  
Bank Credit ◽  
Probit Regression ◽  
Content Type ◽  
Explanatory Variables ◽  
Financial Variables ◽  
Annual Frequency ◽  
Available Information

Purpose – This study aims to present an empirical model designed to forecast bank credit ratings using only quantitative and publicly available information from their financial statements. For this reason, the authors use the long-term ratings provided by Fitch in 2012. The sample consists of 92 US banks and publicly available information in annual frequency from their financial statements from 2008 to 2011. Design/methodology/approach – First, in the effort to select the most informative regressors from a long list of financial variables and ratios, the authors use stepwise least squares and select several alternative sets of variables. Then, these sets of variables are used in an ordered probit regression setting to forecast the long-term credit ratings. Findings – Under this scheme, the forecasting accuracy of the best model reaches 83.70 percent when nine explanatory variables are used. Originality/value – The results indicate that bank credit ratings largely rely on historical data making them respond sluggishly and after any financial problems are already known to the public.

Sources of value creation and destruction in horizontal mergers and acquisitions

2019 ◽  
Vol 45 (10/11) ◽  
pp. 1398-1415
Author(s):  
Mohammed Ibrahimi ◽  
Hicham Meghouar
Keyword(s):  
Mergers And Acquisitions ◽  
Value Creation ◽  
Financial Risk ◽  
Abnormal Returns ◽  
Strategy Management ◽  
Horizontal Mergers ◽  
Accounting Data ◽  
Content Type ◽  
Debt Capacity

Purpose The purpose of this paper is to investigate the determiners to create and destroy value in horizontal mergers and acquisitions (M&A) using accounting indicators supposed to influence the new entity’s value. Design/methodology/approach Using a sample of 90 French listed companies and stepwise regression method, the authors test eight accounting indicators supposed to influence the new entity’s value. Findings To create value after a horizontal M&A, it is necessary to concentrate on turnover and the restructuring of charges without neglecting the control of debt capacity. To avoid destroying value after a horizontal M&A, it is necessary to concentrate on the control of debt capacity and restructuring of charges in order to reduce financial charges and financial risk. Horizontal M&A also create value through the reduction of investment costs and through tax optimization. Research limitations/implications This paper is different from other contributions in that the majority of existing literature concerning the sources of value creation in M&A has been based on abnormal returns or microeconomic data. This paper analyzes accounting data that are likely to be influenced over the long term by corporate decision making. These kinds of decisions influence the firm’s value as well as the long-term gains that industrial investors may hope to obtain. Originality/value This study makes a significant contribution to the existing literature insofar as it seeks to divide the sources of value creation into three categories: sales synergy, cost synergies and hybrid synergies. To the best of the authors’ knowledge, this is also the first study to provide explanations from companies’ accounting data, which can lead managers to a greater vision of post-merger strategy management, reinforcing the mechanism for value creation.

Predicting Acquisitions in India

2012 ◽  
Vol 37 (3) ◽  
pp. 29-50 ◽  
Author(s):  
Parama Barai ◽  
Pitabas Mohanty
Keyword(s):  
Logistic Regression ◽  
Prediction Model ◽  
Prediction Models ◽  
Empirical Studies ◽  
Abnormal Returns ◽  
High Growth ◽  
Free Cash Flow ◽  
Target Firms ◽  
Out Of Sample ◽  
Economic Landscape

Statistical models for predicting takeover targets by using publicly available information, specifically historical accounting information, has attracted considerable academic endeavour. These empirical studies draw from the stylized fact that has unequivocally emerged from literature on performance of mergers and acquisitions: that target firms gain abnormal returns when a takeover announcement is made. Hence, it has been hypothesized that early prediction of takeover targets can stimulate strategic trading that can consistently ‘beat the market’, and make abnormal returns. While it has now been generally proven that such a strategy cannot succeed within semi-strong efficient markets, attempts continue to construct such prediction models to identify potentially valuable firms that can at least provide higher returns under a new management with synergistic propositions. Besides, the characteristics identified by a robust model are also used for preliminary exploration for a potentially good target by acquirers. Following this strand of literature, this paper builds a prediction model for acquisition targets in India using logistic regression. For the estimation of the logistic regression, 122 target firms of acquisitions during the three year-period from 2002 to 2005 were considered, and matched with non-acquiring, non-target firms that had similar promoters' holdings and belonged to the same industry as the target. Results from logistic regression indicate that, a typical target is inherently strong with high growth and large free cash flow, in spite of high debt levels, but encumbered by an inefficient management, who are probably disciplined by takeover market. Traditional determinants of US and UK studies, viz., size and growth-resource imbalance are not significant in the Indian context. Methodological care was taken at various steps to avoid known biases. Estimation period was taken for a modest three year period rather than a longer period to ensure minimal changes in the macro-economic landscape that might have a bearing on the target characteristics. Further, both raw accounting ratios, and industry adjusted ratios were used to account for non-normality of such data. To build the prediction model, cut-off values were calculated using two methods, one that minimized statistical errors and another that maximized returns; again, the latter was found to be superior. Finally, the prediction model was tested on an out-of-sample database of acquisitions that took place during 2005-2006 and was found to yield prediction accuracies up to 91 per cent.

Abnormal Returns to Stockholders of Firms Acquired in Business Combinations and Leveraged Buyouts

1992 ◽  
Vol 7 (2) ◽  
pp. 231-239 ◽  
Author(s):  
Khalil M. Torabzadeh ◽  
William J. Bertin
Keyword(s):  
Potential Risk ◽  
Abnormal Returns ◽  
Leveraged Buyouts ◽  
Related Factors ◽  
Business Combinations ◽  
Target Firms ◽  
Public Firm ◽  
Business Combination ◽  
Financial Characteristics ◽  
Acquisition Announcements

This study analyzes the returns to target stockholders under business combinations and leveraged buyouts surrounding the acquisition announcements. After controlling for the effects of transaction-related factors and firm-specific financial characteristics, target firms in business combinations are found to capture significantly greater abnormal returns compared to their counterparts engaged in leveraged buyouts. The findings imply that the potential risk-adjusted economic gains of a business combination significantly exceed the potential risk-adjusted productive gains associated with restructuring a public firm into a private concern through a leveraged buyout.

Stock price movements and trading behaviors around merger and acquisition announcements

2019 ◽  
Vol 15 (4) ◽  
pp. 593-610 ◽  
Author(s):  
Jin Young Yang ◽  
Reuben Segara ◽  
Jingwei Feng
Keyword(s):  
Stock Price ◽  
Abnormal Returns ◽  
Wealth Effects ◽  
Individual Investors ◽  
Cross Sectional ◽  
Foreign Investors ◽  
Content Type ◽  
Announcement Date ◽  
Target Firms ◽  
Price Movements

Purpose The purpose of this paper is to examine the relationship between price movements of target firms’ stocks and behaviors of local individual, local institutional and foreign investors in trading target firms’ stocks around mergers and acquisitions announcements in Korea. Design/methodology/approach This study uses event study methodology and cross-sectional regressions for abnormal returns. Findings Results reveal that the average abnormal return becomes significantly positive three days prior to the announcement date and becomes insignificant after the announcement date. Results also show that local individual investors tend to sell more intensely prior to announcements for target firms with larger wealth effects. In contrast, foreign investors tend to buy target stocks with larger wealth effects more intensely prior to the announcement date, and then they sell them more intensely in the post-announcement period. Originality/value This paper provides evidence that foreign investors are able to identify target stocks with large wealth effects prior to the announcement date and they realize short-term profits by selling them following the announcement.

When and why firms issue sukuk?

2018 ◽  
Vol 44 (6) ◽  
pp. 774-786 ◽  
Author(s):  
Hasib Ahmed ◽  
M. Kabir Hassan ◽  
Blake Rayfield
Keyword(s):  
Event Study ◽  
Risk Sharing ◽  
Abnormal Return ◽  
Abnormal Returns ◽  
Reaction Model ◽  
Market Model ◽  
Content Type ◽  
Book To Market Ratio ◽  
Financial Characteristics ◽  
Investor Reaction

Purpose The purpose of this paper is to analyze whether investors perceive the issuance of sukuk differently than they do in case of conventional bonds, by using event study with superior data. Then, it analyzes whether financial characteristics of issuers can explain the abnormal return and likelihood of sukuk issuance. Finally, the paper proposes a testable model explaining the investor reaction. Design/methodology/approach This paper uses market model event study to assess investor reaction to the issuance of sukuk. Then, linear and logistic regressions are used to test whether financial characteristics of issuers can explain the abnormal return and likelihood of sukuk issuance. To investigate the differences between sukuk issuers and bond issuers, this paper tests the difference in means of issuer characteristics. Finally, the sample is subdivided into good and bad firm prospects according to dividend/earnings ratio and book-to-market ratio. The subdivisions are used to test the proposed model explaining the investor reaction. Findings The study finds that a large variety of firms issues sukuk. The event study reports significant negative abnormal returns around the announcement date of sukuk issuance. The study also reveals that the earning prospect of issuer firms affect the investor reaction. Firms with lower earning prospect receive a negative reaction from the investors. Also, smaller, or financially unhealthy firms are more likely to issue sukuk. Smaller and riskier firms issue sukuk, because participation in the market is less constrained. In other words, the risk-sharing nature of sukuk might imply that the firm is not confident about the future prospect. However, if the firm has good earnings prospects, investors react to the issuance of sukuk negatively. Research limitations/implications Reliability and availability of data is a hurdle to test the investor reaction model. As more data become available, the models implications can be further tested. Originality/value This paper uses the most complete set of data to study sukuk, making it the most selection bias-free and complete study. Moreover, the proposed investor reaction model will enrich the theory.

scholarly journals Retirement saving in the UK: a life-cycle analysis

2018 ◽  
Vol 35 (1) ◽  
pp. 109-136 ◽  
Author(s):  
Roberta Adami ◽  
Andrea Carosi ◽  
Anita Sharma
Keyword(s):  
Life Cycle ◽  
Ethnic Minorities ◽  
Empirical Studies ◽  
Control Group ◽  
Cross Sectional ◽  
Data Set ◽  
Content Type ◽  
Population Decrease ◽  
The Uk

PurposeThis paper aims to study long-term savings accumulation in the UK. The authors use cross-sectional information from the extensive data set of the Family Resources Survey to compare long-term saving amongst different ethnic groups with the control group, the native population. The paper reflects on whether different groups are more likely to suffer poverty in retirement.Design/methodology/approachIn this analysis, the authors apply the life-cycle framework to explain saving profiles. This theoretical model has been used extensively in the field of economics and can be applied to empirical studies to examine changes in income and saving patterns over the life-course. The framework contends that individuals make savings decisions to smooth consumption over different phases of their life-cycle.FindingsThe findings indicate that socio-economic factors are key elements in determining whether individuals plan for retirement if factors are controlled for the differences in saving behaviours between ethnic minorities and the control population decrease considerably. Asian women, with good education and social standing, display greater saving rates than the control group, while the socio-economic disadvantage suffered especially by Pakistani and Bangladeshi women is key to their inability to save long-term. High levels of poverty in retirement are more likely to be caused by the interaction of low levels of education, part-time work and long spells of unemployment than by ethnicity.Originality/valueThe important contribution to the debate on savings by ethnic minorities is the extension of the life-cycle model to specific sections of the population and to proffer new insights into their saving/dis-saving patterns and ultimately their welfare in retirement.

Evaluating coaching’s effect: competencies, career mobility and retention

2016 ◽  
Vol 37 (7) ◽  
pp. 936-948 ◽  
Author(s):  
Jessica M. Reyes Liske ◽  
Courtney L. Holladay
Keyword(s):  
Empirical Studies ◽  
Career Mobility ◽  
Leadership Competencies ◽  
Healthcare Organization ◽  
Self Report ◽  
Retention Rates ◽  
Future Research ◽  
Control Group ◽  
Leadership Coaching ◽  
Content Type

Purpose Leadership coaching has become an increasingly common method to maximize competency development and behaviors for organizational leaders as well as to improve retention and career mobility. Few empirical studies have tested its capacity to generate such outcomes. The purpose of this paper is to evaluate the effectiveness of a coaching program within a healthcare organization, showing significant impact to the leaders’ behaviors and retention, measured through non-self-report data. Design/methodology/approach In the present study, the behaviors associated with leadership competencies were evaluated using a quasi-experimental design to determine if significant gains have been achieved following a coaching intervention when compared to prior competency ratings. Retention and career movement of participating leaders were tracked to compare rates against a control group. Findings In the present study, leadership coaching was evaluated. Results indicate that individuals who participated in the program, in comparison with those that did not, showed significantly improved leadership competencies and significantly higher retention rates one year post-program. Implications for leadership development programs are discussed. Research limitations/implications One possible limitation of this study is the program structure in the experimental condition received both individual and group coaching so the competency improvement cannot be parsed out to one type of coaching vs another. The authors suggest that this limitation is an opportunity for future research to explore differing effects by coaching type. Originality/value This study provides the healthcare organization with unique quantitative data regarding the positive implications of a leadership program that has not been reported previously. The findings will provide further justification to support leadership coaching programs.

Student response to e-books: study of attitude toward reading among elementary school children in Kuwait

2014 ◽  
Vol 32 (4) ◽  
pp. 458-472 ◽  
Author(s):  
Abdus Sattar Chaudhry
Keyword(s):  
Elementary School ◽  
Empirical Studies ◽  
Student Response ◽  
Control Group ◽  
School Students ◽  
Content Type ◽  
Fourth Grade Students ◽  
The Difference ◽  
Reading Instruments ◽  
The Impact

Purpose – The paper aims to investigate the impact of e-books on attitude towards reading among elementary school students. The paper also reflects on issues related to readings and e-books. Design/methodology/approach – Experimental method of research was used to carry out the study. Experiment was conducted on fourth-grade students in an international school in Kuwait. The control group consisted of nine students. The experimental group had 16 students: eight read the book under the “read-to-me” feature and the other half read the book alone. Students in the two groups were assigned readings randomly and their reactions were studied and compared using different methods. Findings – The experiment demonstrated that students enjoyed reading the electronic medium more than the paperback alternative. The difference, however, was not significant. In addition, difference between the comprehension levels of the three conditions was also insignificant. Students did, however, finish reading the paperback book in a significantly shorter time. Research limitations/implications – A pilot study would have been desirable and also the number of questions asked in the comprehension test could have been expanded. The authors were also not able to explore the possibility of using an automated tool to record the reading time. The two reading instruments used (iPads and iPods) might have affected the students’ understanding and enjoyment of the book, although no noticeable differences were found. Practical implications – The experiment indicted that one of the apparent benefits of reading the e-book was its built-in picture dictionary, as the book used in the study incorporated a lot of word coinage in his texts. Lessons learnt from the study can benefit in enhancing features of e-books and designing reading programmes to help build more positive attitude towards reading among children. Originality/value – Little research has been reported in the literature on investigation of e-books towards reading attitude particularly using empirical studies or experimental research. Most literature focuses on availability of e-books and their features. This study makes a good contribution to the literature on this important aspect of research and makes available useful practical information as well.

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