Bank Dependence and Bank Financing in Corporate M&A

2021 ◽  
Author(s):  
Sheng Huang ◽  
Ruichang Lu ◽  
Anand Srinivasan
Keyword(s):  
Mergers And Acquisitions ◽  
Abnormal Returns ◽  
Loan Pricing ◽  
Loan Contracts ◽  
Cumulative Abnormal Returns ◽  
Bank Financing ◽  
The Difference

We examine the valuation impact of bank-financed mergers and acquisitions (M&As) and the loan contracts used to finance M&A transactions, focusing on the difference between bank-dependent acquirers and other acquirers. We find that bank-financed deals have higher acquirer’s cumulative abnormal returns relative to other cash M&A deals, but this certification effect exists only for bank-dependent acquirers. Despite bank-dependent acquirers being more susceptible to hold-up, banks do not impose higher loan pricing or more stringent nonprice terms on them. After completion of the acquisition, bank-dependent acquirers retain the M&A financing banks for a much larger share of their borrowing needs, suggesting the importance of repeat business for lack of hold-up. Our findings highlight the positive aspects of bank dependence and the importance of implicit contracting for the lack of hold-up in lending markets. This paper was accepted by David Simchi-Levi, finance.

scholarly journals ABNORMAL RETURN DAN LIKUIDITAS SAHAM ATAS PENGUMUMAN AKUISISI

2017 ◽  
Vol 20 (1) ◽  
pp. 151
Author(s):  
Suherman Suherman ◽  
Riznita Nuraisyah ◽  
Gatot N. Ahmad
Keyword(s):  
Mergers And Acquisitions ◽  
Abnormal Return ◽  
Trading Volume ◽  
Abnormal Returns ◽  
Merger And Acquisition ◽  
Stock Liquidity ◽  
Before And After ◽  
The Difference ◽  
Adjusted Model ◽  
Observation Period

Tujuan penelitian ini adalah untuk menganalisis perbedaan abnormal return dan likuiditas saham sebelum dan sesudah pengumuman akuisisi. Pengukuran abnormal return menggunakan market-adjusted model. Pengukuran likuiditas saham menggunakan volume perdagangan dan Amihud’s Illiquidity ratio. Periode pengamatan (event windows) penelitian ini selama 11 hari bursa, yaitu 5 hari bursa sebelum pengumuman akuisisi dan 5 hari bursa sesudah pengumuman akuisisi. Sampel penelitian ini adalah 70 perusahaan yang mengumumkan akuisisi antara 2010-2014. Hasil uji hipotesis menunjukkan bahwa 1)terjadi perbedaan abnormal return yang signifikan sebelum dan sesudah akuisisi, dan 2)tidak terdapat perbedaan likuiditas saham yang signifikan pada periode sebelum dan sesudah akuisisi.The purpose of this study is to analyze the difference of abnormal return and liquidity before and after the announcement of mergers and acquisitions. Abnormal returns are measured with market-adjusted model. Liquidity is measured with trading volume and Amihud Illiquidity ratio. The observation period (event windows) of this research is 11 trading days which 5 trading days before the announcement of the merger and acquisition and 5 trading days after the announcement mergers and acquisitions. Research sample consists of 70 companies which announce merger and acquisition between 2010 and 2014. The results show that 1)there is significant differences of abnormal returns before and after merger and acquisition, and 2)there is no significant differences of stock liquidity before and after merger and acquisition.

The role of boutique financial advisors in mergers and acquisitions

2018 ◽  
Vol 44 (2) ◽  
pp. 212-247 ◽  
Author(s):  
Anna Loyeung
Keyword(s):  
Mergers And Acquisitions ◽  
Information Asymmetry ◽  
Abnormal Returns ◽  
Jel Classification ◽  
Financial Advisors ◽  
Acquisition Performance ◽  
Cumulative Abnormal Returns ◽  
Acquiring Firms ◽  
Target Firms

This study examines the choice of boutique financial advisors in mergers and acquisitions, and the consequences of this choice on deal outcomes and post-acquisition performance. Boutique advisors often specialize in a particular industry and focus exclusively on providing advice in mergers and acquisitions. The results suggest that boutique financial advisors are preferred when the deal is considered complex and when information asymmetry is high. The study finds that the benefits of hiring a boutique advisor flow to both the acquirers and the target firms. Acquiring firms benefit in terms of improved post-merger performance, while target firms benefit in terms of higher completion of value-enhancing deals and positive cumulative abnormal returns. Overall, these results provide support for the growing popularity of boutique financial advisors in the Australian market. JEL classification: G24, G34

scholarly journals Acquisitions of Financially Constrained Targets

2019 ◽  
pp. 1-10
Author(s):  
Maslinawati Mohamad ◽  
Surendranath Rakesh Jory ◽  
Nnamdi Madichie
Keyword(s):  
United States ◽  
Mergers And Acquisitions ◽  
Stock Returns ◽  
Abnormal Returns ◽  
The United States ◽  
Target Firm ◽  
Wealth Transfer ◽  
Stock Market Reaction ◽  
Cumulative Abnormal Returns ◽  
Acquisition Announcements

We examine the extent to which bidders’ stock returns at acquisition announcements reflect the financing needs of the target firm. Using a sample of the United States mergers and acquisitions of a period starts in 1985 and ends in 2012, we find that bidders of financially constrained targets pay lower acquisition premiums and earn higher announcement period cumulative abnormal returns than bidders of unconstrained targets. The lower premium and positive stock market reaction are both sources of value for bidders’ shareholders. Our results contrast the findings of the literature that document an insignificant wealth transfer to bidder shareholders.

scholarly journals Stock Market Reactions to Financing and Payment Decisions for European Mergers and Acquisitions

2020 ◽  
Vol 4 (2) ◽  
pp. 41-89
Author(s):  
Wolfgang Bessler ◽  
David Kruizenga ◽  
Wim Westerman
Keyword(s):  
Stock Market ◽  
Mergers And Acquisitions ◽  
Abnormal Returns ◽  
Market Reactions ◽  
Valuation Effects ◽  
Payment Methods ◽  
Cumulative Abnormal Returns ◽  
Study Methodology ◽  
Acquisition Announcements ◽  
Stock Market Reactions

Aim: We analyze stock market reactions to merger and acquisition announcements for firms in Europe and contribute to the literature by providing empirical evidence how the decisions with respect to alternative financing sources (equity or debt) and the methods of payment (cash or stock) affect the magnitude of the valuation effects.   Research design: An event study methodology is applied to 717 M&A transactions. We analyze the size of the cumulative abnormal returns using the financing sources and payment methods and other variables as the relevant determinants.   Findings: The cumulative abnormal results suggest that target shareholders and bidder shareholders in private deals benefit from mergers and acquisitions. The effect found is centered around the announcement date, making our findings consistent with market efficiency. Debt financed deals outperform equity financed deals and cash paid M&A outperform stock paid M&As, due to information asymmetry, signaling and agency effects.   Originality: This study adds to our understanding of the relevance of the financing sources and the payment methods for mergers and acquisitions in Europe.   Implications: This study may help practitioners to better assess the valuation effects of alternative financing sources and payment methods when acquiring other firms.     JEL: G32, G34

scholarly journals BANKING STOCK ABNORMAL RETURN ANALYSIS OF PRE AND POST MERGER AND ACQUISITION IN INDONESIA

JEMBATAN ◽  
2020 ◽  
Vol 17 (1) ◽  
pp. 13-24
Author(s):  
Rivanny Astricia ◽  
Isni Andriana ◽  
Reza Ghasarma
Keyword(s):  
Mergers And Acquisitions ◽  
Government Policy ◽  
Abnormal Return ◽  
Abnormal Returns ◽  
Merger And Acquisition ◽  
Paired Sample ◽  
Significant Difference ◽  
Study Methodology ◽  
The Difference ◽  
Event Study Methodology

The number of mergers and acquisitions (M&A) in Indonesia is growing because of government policy and also their usefulness as a corporate tool to pursue strategic growth and profit. This study aims to analyze the abnormal returns of banking industries pre and post-merger and acquisition in Indonesia. Using a sample of 7 M&A deals in Indonesia from 2018 to 2019, the event study methodology used in this study is Paired Sample T-Test to tell the difference between pre and post abnormal returns. The data that use for calculating is -30 until +30 of Merger and Acquisition. The result shows that from 7 mergers and acquisition there is only one bank that has a significant difference while the rest does not have a significant difference pre and post the event. This research hopefully can be used for further research, useful for investment practitioners.

scholarly journals Abnormal Returns around Mergers and Acquisitions in the Nepali Stock Market

2021 ◽  
Vol 3 (1) ◽  
pp. 26-42
Author(s):  
Hari Prasad Pathak
Keyword(s):  
Stock Market ◽  
Mergers And Acquisitions ◽  
Financial Institutions ◽  
Economies Of Scale ◽  
Abnormal Returns ◽  
Market Model ◽  
Cross Sectional ◽  
Cumulative Abnormal Returns ◽  
The Impact ◽  
Merger Announcements

A merger includes two relatively equal entities that are combined to form one legal entity worth more than a sum of its two separate parts. In the last few years, many Nepali financial institutions have been consolidating through mergers and acquisitions. This paper aims to investigate how the stock market reacts when financial institutions announce mergers and acquisitions. This paper also examines the impact of cross-sectional variables on the abnormal returns obtained around merger announcements. The study covers 22 successful merger deals that occurred among 48 financial institutions over the period of 2004 to 2013. This paper used the event study method based on the market model to derive abnormal returns associated around the merger announcement date. The event dates are specified as the dates on which the mergers and acquisitions were announced. The results show that leaving a very few exceptional cases, none of the merged financial institutions received significant cumulative abnormal returns on the merger announcements, regardless of the use of different event periods. The cross-sectional regressions show that the pre-merger performance of target and relative market value are the significant influencing variables on acquirers' cumulative abnormal returns. The finding implies that Nepali financial institutions merge merely to increase their capital base without producing any synergistic effect. Therefore, they need strategic plans for choosing the right partner and achieving other benefits like synergy effect, economies of scale and cost reduction from mergers and acquisitions.

scholarly journals WHAT DRIVES MERGERS & ACQUISITIONS WAVES OF LISTED COMPANIES OF THE CHINEXT MARKET? IPO OVER-FINANCING OR STOCK OVERVALUATION

2018 ◽  
Vol 24 (4) ◽  
pp. 1499-1532 ◽  
Author(s):  
Xin Xu ◽  
Yong-jin Liang ◽  
Shun-lin Song
Keyword(s):  
Mergers And Acquisitions ◽  
Market Reaction ◽  
Abnormal Returns ◽  
Market Value ◽  
The United States ◽  
Payment Method ◽  
Cumulative Abnormal Returns ◽  
Cash Payment ◽  
The Government ◽  
Corporate Mergers And Acquisitions

A wave of mergers and acquisitions (M&A) has been consistently rising among the China’s ChiNext companies over the past years, which has drawn great attention across academia and industry. Based on the neoclassical theory and the behavioral theory, this paper explores the driving factors of M&A among Chinese ChiNext companies. Two hypotheses were put forward: one based on IPO over-financing and the other based on the market value overvaluation. IPO over-financing is specific to the Chinese capital market while market value overestimation is driven by the continuous upsurge in the ChiNext Market. Our study found that both factors account for enterprises’ mergers and acquisitions. They have far-reaching influences on such fields as acquisition probability, the size of the transaction, transaction frequency, M&A payment method and market reaction. Due to IPO over-financing, enterprises tend to carry out M&A via cash payment or cash and stock mixed payment method. Heavier IPO over-financing will increase the chance of M&A and leads to larger transaction size and higher transaction frequency. Market value overvaluation will lead to more uses of stock or cash and stock mixed payment on M&A transactions. When the company’s stock is overvalued, the company will use the overvalued equity to acquire other companies. Greater overvaluation of the market value also increases the chance of M&A and leads to a larger transaction size and higher frequency of M&A. In China, IPO over-financing rather than market value over-valuation, is the major driving factor for China’s corporate mergers and acquisitions. Further study found that the market reaction to different payment methods in mergers and acquisitions varies: it has the minimum reaction on cash payment, a larger reaction on stock payment and the greatest reaction on mixed payment. Also, the mixed payment method has the largest cumulative abnormal returns. This is different from the empirical findings in the United States and Europe. This paper provides a theoretical basis and empirical evidence for an in-depth understanding of the wave of mergers and acquisitions of Chinese ChiNext companies, and provides a basis for decision-making and policy recommendations for the government regulators and investors.

Sign in / Sign up

Export Citation Format

Share Document