scholarly journals Share Structure And Wealth Effects Of Corporate Takeovers

2012 ◽  
Vol 28 (4) ◽  
pp. 633
Author(s):  
Onur Arugaslan ◽  
Jim DeMello ◽  
Devrim Yaman
Keyword(s):  
Stock Price ◽  
Abnormal Returns ◽  
Wealth Effects ◽  
Font Size ◽  
Target Firm ◽  
Corporate Takeovers ◽  
Tender Offers ◽  
Negative Results ◽  
Announcement Returns ◽  
Dual Class

<span style="font-family: Times New Roman; font-size: small;"> </span><p style="margin: 0in 0.5in 0pt; text-align: justify; mso-pagination: none;" class="MsoNormal"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">In this study we examine the stock price effects of corporate takeovers by dual class firms and unified firms. Our sample consists of 852 firms that were bidders in takeovers between 1993 and 2009. Our univariate and OLS regression results show that both dual class firms and unified firms obtain insignificant returns for various takeover announcement periods. The average and median returns for these two groups are similar to each other. We also identify several factors that the literature suggests should affect the bidder announcement returns in takeovers. Our results indicate that smaller firms in our sample and firms that pay for the acquisition in cash obtain higher abnormal returns when they announce the takeover. In addition, we find that the factors we identify have different influences on the announcement returns of dual class and unified firms. Specifically, unified firms that engage in tender offers and larger firms obtain more positive announcement returns compared to dual class firms whereas unified firms obtain more negative results when the target firm is a public firm. </span></span></p><span style="font-family: Times New Roman; font-size: small;"> </span>

Disciplinary Corporate Takeovers: Evidence for Australia

2012 ◽  
Vol 15 (03) ◽  
pp. 1250018
Author(s):  
Stuart Dullard ◽  
Kim Hawtrey
Keyword(s):  
Abnormal Returns ◽  
Market Discipline ◽  
Retention Data ◽  
Target Firm ◽  
Hostile Takeovers ◽  
Corporate Takeovers ◽  
Industry Sector ◽  
The Difference ◽  
The Relationship ◽  
Poor Management

This paper tests the relationship between takeovers and poor management performance, known as the market discipline hypothesis. We create a proprietary new Australian dataset for this study by individually researching company reports for executive retention data. We assess takeover targets for pre-bid managerial inefficiency and find evidence that Australian target companies exhibit negative abnormal returns prior to takeover. In particular, we find that disciplinary targets underperform their non-disciplinary counterparts. Our tests take into account the difference between friendly and hostile takeovers, and the industry sector in which the target firm operates.

A Study of Wealth Effects of Takeover Announcements in India on Target Company Shareholders

2013 ◽  
Vol 38 (3) ◽  
pp. 23-50 ◽  
Author(s):  
T Mallikarjunappa ◽  
Panduranga Nayak
Keyword(s):  
Strategic Alliances ◽  
Stock Price ◽  
Statistical Significance ◽  
Abnormal Returns ◽  
Wealth Effect ◽  
Market Model ◽  
Wealth Effects ◽  
Event Window ◽  
Target Company ◽  
The Impact

The business strategy of inorganic growth is carried out by companies by resorting to actions which prominently include mergers, takeovers, and strategic alliances. There is a rapid growth of both mergers and takeovers in India subsequent to the economic liberalization. The companies consider takeover activity as the quickest means of corporate growth to enhance their size and face the domestic and global competition. In spite of several decades of vast research, researchers have not come to the final conclusion on the wealth effect of announcements of takeovers on the shareholders of participating companies. While some studies justify takeover as a socially productive activity which creates value for the shareholders, others provide contrary evidences to show that they destroy value for the shareholders. In India, only some studies have analysed the impact of M&A announcements on the stock return performance of companies involved and there is lack of evidences on wealth effects on shareholders. Therefore, this paper assesses the impact of takeover announcement on the stock price performance of target companies by taking a sample of 227 companies which received takeover bids during 1998–2007. The stock price reaction is examined for a period of 61 days surrounding the bid announcement day employing standard market model. BSE- 200 index is used as a proxy for the market. The regression co-efficient and the constant terms are estimated over a period of 250 days (-280 to -31) and the statistical significance of the results of the study is determined by non-standardized and standardized abnormal return methods. Both raw returns and log returns are examined. Results of the study show that target company shareholders experience substantial and statistically significant cumulative average abnormal returns (CAARs) of 27-37 percent — 37 percent when raw returns are employed and 27 percent when log returns are employed. The conclusions remain unchanged irrespective of the testing procedure used (i.e., non-standardized or standardized abnormal returns method) and even for several shorter event window periods within a broader event window of 61 days. The results for target companies are consistent with the evidence of extant research that major benefits from M&As accrue to target company shareholders. The practical implication of the study is that there is a large and significantly positive wealth effect on the target company shareholders in response to the announcement of takeovers. Takeovers offer an opportunity to shareholders of target companies and general investors to make profits both in the period before and after the announcement of the takeover bid.

scholarly journals Agency conflicts and the wealth effects of proxy contests

2014 ◽  
Vol 12 (1) ◽  
pp. 8-30
Author(s):  
Gurmeet Singh Bhabra ◽  
Chris Wood
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Agency Costs ◽  
Shareholder Wealth ◽  
Good News ◽  
Wealth Effects ◽  
Agency Conflicts ◽  
Target Firm ◽  
Proxy Contests

We examine the shareholder wealth impact of proxy contests and find that over the three years preceding the contest, target stock prices significantly underperform their industry peers. In addition, consistent with the monitoring role of proxy contests, the announcement and full contest periods result in a positive stock price reaction suggesting that the market views the initiation of a proxy contest as good news. Interesting differences emerge between firms in which dissidents win seats and those where they do not win seats. While target firm stock prices appreciate for all firms at the announcement, such wealth gains are permanent only for the subsample of targets which not only are afflicted with elevated levels of agency problems but also make significant reduction in discretionary expenditures. When dissidents do not win seats, no attempt to reduce agency costs is apparent, and as a result, these firms experience a sustained wealth loss over the years surrounding the contest. The steps taken to reduce agency costs primarily in firms in which dissidents win seats suggests that proxy contests fulfil their intended role of disciplining the board and improve firm performance.

scholarly journals Has the threat of a takeover improved the management of target firms? An analysis of firms in which M&A consulting, Japan’s first hostile bidder, acquired stakes

2009 ◽  
Vol 7 (2) ◽  
pp. 137-145
Author(s):  
Timothy Kruse ◽  
Kazunori Suzuki
Keyword(s):  
Stock Price ◽  
Operating Performance ◽  
Abnormal Returns ◽  
Investment Fund ◽  
Target Firm ◽  
Hostile Takeovers ◽  
Actual Operating ◽  
Target Firms ◽  
New Development ◽  
Target Company

This paper examines the new development of hostile takeovers and shareholder activism in Japan. The hostile bidders claim that the threat of takeover which they pose on the management of a poorly managed company is not only to their benefit, but also to that of the target company in general, because the management will run the company better to maximize its value. Nearly a decade having passed since the first-ever hostile TOB attempt in Japan by M&A Consulting (MAC), an investment fund led by Mr. Yoshihiro Murakami in January 2000, we examine the stock price and operating performance of the companies whose shares were bought by the MAC. We find that the shareholders of the target companies indeed enjoyed large positive abnormal returns in the two years following the news. We report, however, that their operating performance declined over the four fiscal years following such news. There is little evidence so far that the threat of a hostile takeover improved the actual operating performance of the target firm.

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.

Share classes, families and asset purchases: Canadian evidence

2019 ◽  
Vol 46 (2) ◽  
pp. 217-236
Author(s):  
Lingfeng Guo ◽  
Lawrence Kryzanowski ◽  
Yinlin Nie
Keyword(s):  
Abnormal Returns ◽  
Wealth Effects ◽  
Single Class ◽  
Content Type ◽  
Corporate Decisions ◽  
Simultaneous Equations Models ◽  
Endogenous Variables ◽  
Primary Determinant ◽  
Asset Purchases ◽  
Dual Class

Purpose The purpose of this paper is to test if relative asset purchase values (RAPVs) differ between single- and dual-class purchasers (not) differentiated by family ownership for Canadian firms. Design/methodology/approach The paper uses multivariate regressions and 2SLS estimations of simultaneous equations models with both continuous and dichotomous endogenous variables. Data on share structures and family involvements are hand collected. Findings RAPVs for dual-class purchasers are significantly different (larger) than their single-class counterparts only for family-controlled samples. Larger RAPVs for dual-class purchases are associated with higher degrees of dual-class structures, higher family ownerships and with boards with no more than one family member. Research limitations/implications RAPV is important because of its common use as a primary determinant of the wealth effects of M&As, its use as an exchange-rate proxy in two-stage regressions used to determine the amount of abnormal returns attributable to short selling activity around M&A announcements, and its use as a channel for conveying information about deal complexity, seller’s bargaining power, additional monitoring benefits from purchase and/or greater challenges in incorporating a purchase into existing assets. Larger sample size would facilitate more differentiated examinations. Practical implications Findings imply that dual-class share structures assist family shareholders in elevating their control over corporate decisions involving asset purchases. Social implications This paper furthers the authors’ knowledge about the effects of agency issues on corporate decisions. Originality/value It provides an extension and robustness test of the US evidence for asset purchases by providing evidence for Canada given its greater preponderance of families as the ultimate controlling shareholders, restricted or subordinated voting shares issued and pyramidal structures.

scholarly journals Wealth Effects Of Bank Mergers And Acquisitions In Asian Emerging Markets

2011 ◽  
Vol 28 (1) ◽  
pp. 47 ◽  
Author(s):  
Jianyu Ma ◽  
Jose A. Pagan ◽  
Yun Chu
Keyword(s):  
Mergers And Acquisitions ◽  
Banking Industry ◽  
Abnormal Returns ◽  
Wealth Effects ◽  
Font Size ◽  
Developed Markets ◽  
Cumulative Abnormal Returns ◽  
Different Types ◽  
Asian Emerging Markets ◽  
Better Than

<span style="font-family: Times New Roman; font-size: small;"> </span><p style="margin: 0in 0.5in 0pt; text-align: justify; mso-pagination: none;" class="MsoHeader"><span style="color: black; font-size: 10pt; mso-fareast-font-family: SimSun; mso-themecolor: text1; mso-fareast-language: ZH-CN;"><span style="font-family: Times New Roman;">Through analysis of stock responses to two different types of banking M&amp;A deals, specifying M&amp;A and diversifying M&amp;A, we find that specifying M&amp;A deals incur positive cumulative abnormal returns (CAR) in both two-day and three-day windows without controlling for firm size. Diversifying M&amp;A deals incur positive CAR in two different event windows. However, the differences between the two windows are not statistically significant. Contrary to previous studies on M&amp;A in the banking industry of developed markets, the results of our study indicate that markets do not distinguish among various types of M&amp;A deals in the banking industry around the date of announcement. Diversifying M&amp;A generate positive three-day CARs but they are not significantly better than specifying M&amp;A.</span></span></p><span style="font-family: Times New Roman; font-size: small;"> </span>

scholarly journals Is Shari’ah Index Membership Risky? The Case of Malaysia Shari’ah Blue-Chip Index

2020 ◽  
pp. 75-101
Author(s):  
Asmah Mohd Jaapar ◽  
Shamsher Mohammad Ramadili Mohd ◽  
Mohamed Eskandar Shah Mohd Rasid
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Abnormal Returns ◽  
Return Volatility ◽  
Negative Results ◽  
Trading Volumes ◽  
Temporary Decrease ◽  
New Evidence ◽  
Blue Chip

The study explores the Shariah index membership effect around index revision period especially to the newly added and deleted constituent stocks (termed as event stocks). This study analysed 40 event stocks for Shariah blue-chip index, Dow Jones Islamic Market Titans Malaysia 25 Index (DJIMY25). The analysis was conducted over a period of seven years (2009-2015) using event study methodologies which capture abnormal returns, trading volumes, and return volatility, and discussed the extent of market efficiency. The study divided the event stocks into three groups – additions, deletions due to the index annual rebalancing and deletions due to non-Shariah compliance. The findings of this study provide a new evidence on index additions and deletions contrary to the ones reported in previous studies. Surprisingly, additions to DJIMY25 produces negative results with permanent decrease in stock returns and temporary decrease in trading volumes. The deletions either due to the index annual rebalancing or non-Shariah compliance have shown negative results with the decrease in stock price, temporary decrease in trading volumes and increase in the stock’s absolute volatility. The finding of this study implied that index membership in Shariah index can induce Shariah compliant risk for the firms that are unable to maintain their Shariah compliant status in the long-term.

An Empirical Study on Efficient Market Hypothesis with reference to FMCG Sector

GIS Business ◽  
2020 ◽  
Vol 15 (1) ◽  
pp. 109-126
Author(s):  
Nitin Tanted ◽  
Prashant Mistry
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Abnormal Returns ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Controversial Issues ◽  
Efficient Market ◽  
Price Movements ◽  
Run Test ◽  
Stock Price Movements

One of the highly controversial issues in the area of finance is “Efficient Market Hypothesis”. Efficient Market Hypothesis states that, “In an efficient market, all available price information is reflected in the stock prices and it is not possible to generate abnormal returns compared to other investors.” A lot of studies conducted previouslyto test the Efficient Market Hypothesis, confirmed the theory until recent years, when some academicians found it to be non-applicable in financial markets. According to them, it is possible to forecast the stock price movements using Technical Analysis. The results of various studies have been inconclusive and indefinite about the issue. This study attempted to test the efficiency of FMCG Sector stocks in India in its weak form. For the study, closing prices of top 10 stocks from Nifty FMCG index has been taken for the 5-year period ranging from 1st October 2014 to 30th September 2019. Wald-Wolfowitz Run test has been used to test the haphazard movements in the stock price movements. The results indicated that FMCG sector stocks does support the Efficient Market Hypothesis and exhibit efficiency in its weak form. Hence, it is not possible to accurately predict the price movements of these stocks.

The Effect of Acquirer Net Operating Losses on Acquisition Premiums and Acquirer Abnormal Returns

2019 ◽  
Vol 41 (2) ◽  
pp. 103-124
Author(s):  
Merle M. Erickson ◽  
Karen Ton ◽  
Shiing-wu Wang
Keyword(s):  
Stock Price ◽  
Abnormal Returns ◽  
Price Response ◽  
Transaction Prices ◽  
Merger Announcement ◽  
Tax Benefits

ABSTRACT This study examines whether acquirer NOL-related tax benefits generated in an acquisition are shared with the target. For a sample of 1,959 acquisitions, we find that acquisitions of profitable targets by acquirers with NOLs are associated with higher acquisition premiums than acquisitions by non-NOL acquirers. This result indicates that potential post-acquisition tax benefits from use of acquirer NOLs are shared with the target in the form of higher transaction prices. We also find that the acquirer's merger announcement stock price response is positively associated with these tax benefits, which is consistent with the conclusion that acquirers retain part of these potential tax benefits.

Sign in / Sign up

Export Citation Format

Share Document