scholarly journals When Good Things Turn Bad: Evidence from G-7 Serial Acquirer Bidding

2020 ◽  
Vol 16 (2) ◽  
pp. 145-177
Author(s):  
Ibrahim Yousef
Keyword(s):  
Mergers And Acquisitions ◽  
Firm Value ◽  
Abnormal Returns ◽  
Shareholder Wealth ◽  
Bivariate Analysis ◽  
Payment Method ◽  
Average Abnormal Return ◽  
Industry Diversification ◽  
The Impact ◽  
Serial Acquirer

This study investigates the impact of acquirer bidding experience on acquiring abnormal returns based on empirical evidence from a large sample of 10,880 bidders making 23,852 deals from G-7 countries. Both event study and regressions analysis have been used to examine the impact of acquirer bidding experience on acquirer returns. The findings show that “single acquirers” achieve higher returns, with a cumulative average abnormal return (CAAR) of 3.354%, but this number tends to decrease with increasing numbers of previous bids. In addition, the results of the bivariate analysis demonstrate that a single acquisition alone generates greater abnormal returns than those which are part of a series of acquisitions, with very robust results even after accounting for additional heterogeneity in payment method, target status and country/industry diversification. The findings of the multivariate analysis also confirm that serial acquirers are associated with significantly lower abnormal returns. This evidence conflicts with the notion that more experience with mergers and acquisitions (M&As) will correspond to improve target valuation and thus lead to more profitable agreements. In contrast, my findings imply that shareholder wealth is destroyed by serial acquirers, which suggests that the goal of maximising firm value is not always the sole motivation for engaging in M&A activities.

scholarly journals The Long-Run Performance of U.S. Bidding Firms in the Post M&A Period: The Impact of Bid Type, Payment Method and Industry Specialisation

2017 ◽  
Vol 12 (2) ◽  
pp. 230 ◽  
Author(s):  
George Giannopoulos ◽  
Andrew Holt ◽  
Ehsan Khansalar ◽  
Patrick Mogoya
Keyword(s):  
Mergers And Acquisitions ◽  
Financial Services ◽  
Abnormal Returns ◽  
The United States ◽  
Industrial Sector ◽  
Payment Method ◽  
Public Firms ◽  
Services Sector ◽  
Long Run ◽  
The Impact

This study investigates how mergers and acquisitions (M&A) affect the wealth of shareholders of public firms in the United States (U.S). More specifically, it investigates whether the nature of the bid, the payment method used, and the type of M&A have implications for shareholders of U.S bidding firms. The study analyses 352 mergers and acquisitions in the U.S during the period 1999-2008, and its results indicate that bidding firms suffer significant negative buy-and-hold abnormal returns in the three years period after a M&A announcement. The results also suggest that, in the long-run, hostile bids and cash-financed bidders outperform friendly bids and stock-funded bidders, respectively. Furthermore, the study also finds that in the long-run bidder firms that focus on industry specialisation within their M&A targets significantly outperform firms that adopt a more diversified strategy. The analysis also investigates the effects of M&A specialisation/diversification in six different sectors, and finds that specialised bidders outperform diversified bidders in four sectors: consumer & basic materials, energy & utilities, communications and technology. Furthermore, bidder firms in the financial services sector perform significantly better when diversifying into other sectors, while the performance of bidder firms in the industrial sector appears unaffected by the degree of M&A specialisation or diversification.

scholarly journals The Impact of Single and Multiple Mergers and Acquisitions on Shareholders’ Wealth of UK Bidder Firms

2017 ◽  
Vol 9 (3) ◽  
pp. 141
Author(s):  
George Giannopoulos ◽  
Ehsan Khansalar ◽  
Patel Neel
Keyword(s):  
Mergers And Acquisitions ◽  
Target Location ◽  
Abnormal Returns ◽  
Payment Method ◽  
Short Term ◽  
Cross Border ◽  
Learning Hypothesis ◽  
The Impact ◽  
First Time ◽  
Industry Relatedness

This study investigates the impact of takeover announcements on UK acquirer shareholders’ wealth during the period 2002-2006. More specifically, it is investigated whether the impact of single acquirers on shareholders’ wealth is significantly different from the impact of multiple acquirers. Findings suggest that acquirer shareholders experience positive abnormal returns during the announcement period. Moreover, the results indicate single acquirers consistently outperform multiple acquirers when testing for deal characteristics such as: payment method (cash or equity), target status (public or private), target location (domestic or cross-border) and industry relatedness (specification or diversification). Performance declines with sequential acquisitions due to merger programme announcement hypothesis. Successful first time acquirers suffer from hubris whilst unsuccessful first time acquirers learn from their experiences suggested by the organisation learning hypothesis but go on to suffer from hubris. Acquisitions of private firms yield significant abnormal returns whereas public acquisitions reduce the value of UK acquirers. The effect of cash and equity, domestic and foreign, related and unrelated takeovers are inconclusive for the short-term windows investigated by this study.

New product announcement: spokesperson a manifestation of increasing firm value

2018 ◽  
Vol 13 (6) ◽  
pp. 1635-1655
Author(s):  
Bikram Jit Singh Mann ◽  
Sonia Babbar
Keyword(s):  
Event Study ◽  
Firm Value ◽  
Source Credibility ◽  
Shareholder Value ◽  
Abnormal Returns ◽  
New Product ◽  
Content Type ◽  
Study Methodology ◽  
The Impact

Purpose Before introducing new products, companies make announcements regarding the launch of the product which influences stock market yields of the announcing companies. Information content of the new product announcement has never been an exclusive focused stream of research. Therefore, an assessment of the impact of the content characteristics of the new product announcement on the shareholder value and the impact of source credibility (spokesperson) in making such announcements is a major gap in the existing literature. The paper aims to discuss these issues. Design/methodology/approach First, the standard event study methodology has been employed on the sample to measure the abnormal gains/losses accruing to the announcing firms. Second, moderated regression analysis (MRA) is employed to identify the characteristics of the new product announcement and to check the role of the spokesperson in creating shareholder value. Findings The results of the event study indicate that the abnormal returns are generated during the new product announcement. The results of MRA disclose the variables having a positive and a significant influence on the effective returns of the announcing companies. Likewise, the role of the spokesperson has come out brightly as a credible communicator. Originality/value The research provides a direction to the announcing companies regarding the content of the announcement leading to a positive perception among the investing community. Likewise, it also provides direction to the investor community about the characteristics of the announcement content they give weight age in forming a perception of strength in evaluating the new product announcement, to which they are largely unaware.

Bank mergers and acquisitions in Greece: the financial crisis and its effect on shareholder wealth

2019 ◽  
Vol 16 (2) ◽  
pp. 273-296 ◽  
Author(s):  
Ioannis Tampakoudis ◽  
Michail Nerantzidis ◽  
Demetres Subeniotis ◽  
Apostolos Soutsas ◽  
Nikolaos Kiosses
Keyword(s):  
Financial Crisis ◽  
Mergers And Acquisitions ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Shareholder Wealth ◽  
Conclusive Evidence ◽  
Wealth Effects ◽  
Bank Mergers ◽  
Content Type ◽  
The Impact

Purpose The purpose of this paper is to investigate the wealth implications of bank mergers and acquisitions (M&As) in the unique Greek setting given the triple crisis phenomenon – banking, sovereign debt and economic crises – that prevailed after the global financial crisis. Design/methodology/approach The study examines bank M&As and bank transactions over the period from 1997 to 2018, as well as government-assisted M&As during the crisis. The wealth effects of bank M&As are assessed using both univariate and multivariate frameworks. Findings Findings show a neutral crisis effect on the valuation of M&As upon their announcement. However, the authors provide conclusive evidence that M&A completions are value-destroying events for acquiring banks during the crisis, far worse than in the pre-crisis period. Greek banks also fail to create value from government-assisted mergers. The results suggest that the financial stability and the prevention of further deepening of the Greek crisis with possible contagion effects were achieved at the expense of shareholders and taxpayers. Originality/value To the authors’ knowledge, this is the first study that examines the impact of the Greek triple crisis on the wealth effects of bank M&As and bank transactions. Also, the study provides first evidence with regard to the economic impact of government-assisted M&As in the European context.

Restructuring through spin-off: impact on shareholder wealth

2019 ◽  
Vol 45 (10/11) ◽  
pp. 1458-1468
Author(s):  
Puja Aggarwal ◽  
Sonia Garg
Keyword(s):  
Positive Influence ◽  
Shareholder Wealth ◽  
Event Window ◽  
Content Type ◽  
Share Prices ◽  
Market Index ◽  
Average Abnormal Return ◽  
The Usa ◽  
Study Methodology ◽  
The Impact

Purpose The purpose of this paper is to analyse the impact of spin-off announcements on the parent firm’s share prices. Also, it is studied that during which period the announcement impacts the share prices significantly thereby affecting the shareholder wealth. Design/methodology/approach A sample of 76 Indian firms has been taken which announced the spin-off of their one or more divisions during 2010–2011 to 2015–2016. The authors have used the event study methodology with an event window period of −35 to +35. Estimation window of 256 (−290, −35) days is considered in the study. S&P BSE 500 is used as a market index. Findings The authors found that spin-offs have a significantly positive influence on the share prices of the parent firm. The authors also found that average abnormal return (AAR) of all the 76 companies taken together have been highest on day 0 and the cumulative AAR is highest for day +1. These results are in consonance with what had been concluded by Hite and Owers (1983), Cusatis et al. (1993), Miles and Rosenfeld (1983) and Rosenfeld (1984). All these studies are based on the data derived from the USA. Outcome of this study substantiates the same results when Indian spin-offs are analysed. Originality/value This paper provides the first comprehensive analysis of the impact of Indian spin-offs on the shareholder’s wealth.

Carbon tax, corporate carbon profile and financial return

2014 ◽  
Vol 26 (3) ◽  
pp. 351-373 ◽  
Author(s):  
Le Luo ◽  
Qingliang Tang
Keyword(s):  
Carbon Tax ◽  
Negative Impact ◽  
Abnormal Returns ◽  
Economic Restructuring ◽  
Shareholder Wealth ◽  
Financial Return ◽  
Content Type ◽  
Carbon Policy ◽  
Carbon Profile ◽  
The Impact

Purpose – This paper aims to investigate the impact of the proposed carbon tax on the financial market return of Australian firms. It also considers the differential tax effect on individual firms with different carbon profiles, including factors such as emissions costs, carbon disclosure and climate-change policies. Design/methodology/approach – Utilising the event-study method, the authors examine the market reaction to seven key carbon legislative information events that occurred from February 2011 to November 2011. The sample includes 48 different firms whose emissions-related data are available from Carbon Disclosure Project reports; thus, 336 firm-event observations are used for the cross-sectional analysis. Findings – The paper documents evidence that the proposed tax has an overall negative impact on shareholder wealth as measured by abnormal returns. The negative impact varies across sectors, with the most significant effect found in the materials, industrial and financial sectors. It was also found that a firm’s direct carbon exposure (as measured by Scope 1 emissions) is significantly associated with abnormal returns, whereas the indirect exposure (as measured by Scope 2 emissions) is not, because Scope 2 emissions are not covered by the tax. In addition, the findings suggest that the information content of the events is more notable during the early stages of the development of the carbon tax. Research limitations/implications – The sample is restricted to the largest firms with relevant carbon profile information. Thus, caution should be exercised when generalising the inferences. Practical implications – The introduction of the carbon tax was largely unexpected and most firms were unprepared for it; thus, their carbon policy appears inadequate and does not impress investors. An understanding of how the carbon tax affects shareholder value and welfare will encourage management to take proactive actions to mitigate the compliance costs of carbon legislation. Originality/value – The enactment of the Australian carbon tax perhaps represents one of the biggest social and economic restructuring events in the country’s history. Our results offer initial insight into its impact and suggest that investors would penalise firms with heavy direct operational emissions. In addition, Australian corporate carbon policy seems inadequate, so does not reverse the negative effect of the tax on the value of a firm.

The effect of corporate governance mechanisms on European Mergers and Acquisitions

2018 ◽  
Vol 18 (5) ◽  
pp. 965-986 ◽  
Author(s):  
Ioannis Tampakoudis ◽  
Michail Nerantzidis ◽  
Demetres Soubeniotis ◽  
Apostolos Soutsas
Keyword(s):  
Corporate Governance ◽  
Mergers And Acquisitions ◽  
Economic Impact ◽  
Abnormal Returns ◽  
Voting Rights ◽  
Shareholder Wealth ◽  
Wealth Effects ◽  
Board Size ◽  
Content Type ◽  
Acquiring Firms

Purpose The purpose of this study is twofold: First, to assess the economic impact of Mergers and Acquisitions (M&As) on European acquiring firms from the beginning of the sixth merger wave onward. And second, to investigate the effect of CG mechanisms such as board size, voting rights and anti-takeover provisions (ATPs) on acquirers’ gains, along with a set of control variables. Design/methodology/approach For the purpose of the study, the authors use a sample of 349 completed M&As across all business sectors between European firms from 01/01/2003 to 31/12/2017. Abnormal returns are estimated by applying an event study methodology, and the effects of CG mechanisms are assessed with univariate and multivariate cross-sectional regressions. Findings The authors present evidence that acquirers realize significant positive excess returns upon the announcement of M&As. The authors find past profitability to be a strong indicator of value creation, while most of the traditional firm-specific and deal variables fail to interpret the results. The authors’ analysis indicates that the examined CG measures have a significant effect on acquirer’s gains. More specifically, the authors find that boards in excess of eight directors are negatively related to announcement-period abnormal returns. In contrast, the wealth effects for acquiring firms are positively related to shareholders’ voting rights and/or to the number of ATPs. The estimated coefficients of all three CG mechanisms are statistically significant across alternative model specifications. Research limitations/implications A clear implication is that the existence of certain CG mechanisms leads to value-enhancing strategic decisions for European acquirers. In terms of policy direction, the authors’ findings assist practitioners and/or national and transnational institutions in perceiving the efficacy of certain CG practices. Practical implications This study indicates that Corporate Governance Statements (CGSs) fail to provide adequate information to investors to understand in-depth the CG mechanisms that companies apply. Thus, the authors recommend that CGSs should provide not only narrative information but also information that may generate value for shareholders and other stakeholders as well. Such information should be qualitative and/or quantitative in nature and be made available to market participants to support their decision-making. Originality/value To the authors knowledge, this is the first study that investigates the effect of CG on the economic impact of M&As for European acquirers, using three widely examined CG mechanisms, namely, the board size, the voting rights and the ATPs. The authors’ empirical findings form the basis for further examination of the linkage between M&As and CG, with the intention of establishing the appropriate CG framework that will ensure shareholder wealth creation. This line of research could produce new insights in the field, allowing investors and policymakers to appreciate the benefits of effective CG.

scholarly journals The impact of divestitures on shareholder wealth – The DACH case

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nils Teschner ◽  
Herbert Paul
Keyword(s):  
Positive Impact ◽  
Relative Size ◽  
Abnormal Returns ◽  
Shareholder Wealth ◽  
Wealth Effects ◽  
Wealth Creation ◽  
Publicly Traded ◽  
Content Type ◽  
Publicly Traded Companies ◽  
The Impact

PurposeThe purpose of this research is to study the impact of divestitures on shareholder wealth. This study covers selloffs of publicly traded companies in Germany, Austria and Switzerland (DACH region) during the period 2002–2018. It aims to understand the overall effect of selloffs on shareholder wealth as well as the impact of important influencing factors.Design/methodology/approachThis study is part of capital market studies which investigate shareholder wealth effects (abnormal returns) using event study methodology. To determine the significance of abnormal returns, a standardized cross-sectional test as suggested by Boehmer et al. (1991) was applied. The sample consists of 393 selloffs of publicly traded companies with a deal value of at least EUR 10m.FindingsThe findings confirm the overall positive impact of selloffs on shareholder wealth. The average abnormal return on the announcement day of the sample companies amounts to 1.33%. The type of buyer, the relative size of the transaction as well as the financial situation of the seller in particular seem to influence abnormal returns positively.Originality/valueThis study investigates shareholder wealth creation through selloffs in the DACH region, a largely neglected region in divestiture research, but now very relevant due to increasing pressure of active foreign investors. Sophisticated statistical methods were used to generate robust findings, which are in line with the results of similar studies for the US and the UK.

The impact of the Food Safety and Modernization Act on firm value

2016 ◽  
Vol 76 (2) ◽  
pp. 233-245 ◽  
Author(s):  
Mark Steven Johnson ◽  
Tolani Lawson
Keyword(s):  
Food Safety ◽  
Firm Value ◽  
Factor Model ◽  
Abnormal Returns ◽  
Market Value ◽  
Capital Asset Pricing ◽  
President Obama ◽  
Content Type ◽  
Time Period ◽  
The Impact

Purpose – The purpose of this paper is to determine the impact of the passage and signing of P.L. 111-353, the Food Safety Modernization Act (FSMA), on the market value of agribusiness firms. Design/methodology/approach – The authors conduct an event study of the shareholder value effects of FSMA. The short-window analyses estimate the three-, five-, and seven-day market responses to three key event dates: passage by the House, passage by the Senate, and the signing of FSMA by President Obama. The long-window analyses examine a time period that encompasses the three informational events, as well as the 30 months after the signing of FSMA. To control for the effects of market-wide fluctuations, the authors use two alternative models of the returns generating process to calculate abnormal returns, the Capital Asset Pricing Model (CAPM) and the Fama-French three-factor model. Findings – The short-window analyses show no evidence of a significant reaction to the passage of FSMA by the House or the Senate, but evidence of a significant negative reaction to the signing of FSMA by President Obama. The long window results which span the of passage by House, passage by the Senate and signing by the President indicate a decline in the average market value of agribusiness firms on the order of – 10 percent over the period. Additionally, the authors find some evidence that this effect is not evenly spread out across different types of agribusiness firms (wholesale, grocery, and processing). Originality/value – The study is the first to examine the impact of P.L.111-353 on the market value of agribusiness firms.

The Impact of Eliminating the Form 20-F Reconciliation on Shareholder Wealth: Evidence from U.S. Cross-Listed Firms

2014 ◽  
Vol 90 (1) ◽  
pp. 199-228 ◽  
Author(s):  
Lucy Huajing Chen ◽  
Inder K. Khurana
Keyword(s):  
Financial Reporting ◽  
Home Country ◽  
Control Sample ◽  
Abnormal Returns ◽  
Shareholder Wealth ◽  
Information Loss ◽  
Data Availability ◽  
Wealth Effects ◽  
Listed Firms ◽  
The Impact

ABSTRACT This paper examines shareholder wealth effects in U.S. and home-country markets relating to the Securities and Exchange Commission's (SEC) decision to eliminate the Form 20-F reconciliation. During the period of examined events, we find positive cumulative abnormal returns for the treatment sample of U.S. cross-listed firms that prepare financial statements under International Financial Reporting Standards (IFRS), but no such effects for our control sample comprising cross-listed non-IFRS, U.S. domestic, or home-country firms. We find the stock market impact for our treatment sample to be positively related to our proxy for cost savings and negatively related to the pre-adoption reconciliation magnitude from IFRS to U.S. GAAP. This suggests shareholders place some value on reconciliation information, but the costs of preparing and auditing reconciliations generally outweigh concern about information loss. Moreover, we find that information loss is less pronounced for firms having used IFRS for a longer period, suggesting the learning effect mitigates information loss. Data Availability: Data are publicly available from sources identified in the article.

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