CFO gender in curbing CEO dominance on overpriced acquisition premiums

PurposeThe purpose of this study is to evaluate the tempering effect of the presence of a female chief financial officer (CFO) on potentially dominant chief executive officer (CEO) behavior expressed through the overvaluing of acquisition premiums.Design/methodology/approachThis study used Securities Data Corporation (SDC) database data over an eight-year period to analyze the relationships between CEO dominance and the acquisition premiums paid in an acquisition deal. The study also analyzes the effect of CFO gender in curbing CEO dominance in the acquisition deals. The authors employ clustered standard errors ordinary least squares (OLS) regression analysis along with robustness testing, which supports the validity of our conclusions.FindingsThe authors expect and find that as CEO dominance rises, so does the acquisition premium; however, the presence of a female CFO in such situations significantly reduces the overpayment of the acquisition premium.Practical implicationsThe study findings advocate for organizational change in the form of an increased presence of female CFOs within business organizations.Originality/valueThis study contributes to the accounting literature by timely exploiting a rising trend in which female executives are expected to become more prolific. The authors’ research indicates that their entrenchment into business organizations, thereby promoting gender diversity, produces beneficial outcomes for those organizations. It also capitalizes on the specific attributes of the CEO–CFO relationship, which lends itself to particular effectiveness in the hands of female CFOs.

The Influence of Nation-Level Institutions on Acquisition Premiums: A Cross-Country Comparative Study

We build on neo-institutional theory to examine the manner in which nation-level institutions systematically affect domestic acquisitions—that is, acquisitions involving acquirers and targets from the same country. Specifically, we study in what way premiums are influenced through a set of cognitive, normative, and regulatory forces. In terms of cognitive pressures, we theorize that prior premium decisions of industry peers in the same country influence focal acquisition premiums, since prior premium decisions serve as reference frames for firms. In addition, we posit that normative forces in the form of the national cultural values of uncertainty avoidance, future orientation, and in-group collectivism affect bid premiums, as these factors influence the manner in which firms deal with the uncertainty, payoff time, and merger of groups inherent to acquisitions. Furthermore, we propose that a country’s regulatory pressures through its disclosure requirements influence premiums, since they reduce information asymmetries and affect a firm’s confidence in assessing its potential gains from acquisitions. Using a sample of domestic acquisitions, we find support for several of the hypotheses. Our work offers a cross-country comparative study of how nation-level institutions affect domestic bid premiums and makes theoretical contributions to acquisition premium research and institutional theory.

Economic Feasibility of LNG Fuel for Ocean-going Ships: A Case Study of Container Vessels

Liquefied Natural Gas (LNG) fuelled system has received increasing attention from the shipping industry. However, the main barriers such as high capital investment costs required by LNG fuelled ships, uncertainties in LNG supply and price are still hinder the uptake of LNG as a marine fuel, especially for the trans-ocean going application. Also, uncertainties brought by unexpected events such as war and global pandemic, force us to revisit the topic of economic feasibility of the alternative emission reduction technologies. A lifetime-based cost evaluation framework has been proposed to systematically evaluate the implementation of using LNG as fuel for general ocean-going commercial ships. The benefits of the approach were discussed through a case study and the economic performance of the three varying sizes of ocean-going LNG-fuelled container ships were tested. Uncertainty analysis has been conducted with Monte Carlo simulation to evaluate the economic feasibility of using LNG as marine fuel under different fuel price scenarios. Case study and uncertainty analysis indicated that the acquisition premium for ocean-going LNG-fuelled container ships is sufficient to warrant the saving in terms of the LCC. Nevertheless, under the low fuel price scenarios, LNG fuelled ship has no cost advantages in the lifetime perspective.

Media Exposure and Acquisition Premium Evidence from Chinese Investing Companies

Acquisition deals often draw the attention of the media and the media exposure influences the decisions of stakeholders. Especially attractive in recent years are deals that Chinese companies are investing actively both within China and across the globe. How does media exposure influence the price premium of the target companies that Chinese companies acquire? Building upon the literature of economics and psychology, we develop competing hypotheses on the potential effect. In addition, we argue that the effects of media exposure are different between the Chinese companies’ domestic and international acquisition deals. The data from the recent decade’s transactions indicate that media exposure is associated with the higher premium, supporting the attention-based view. In addition, we hypothesize the effect of media exposure is larger for international deals than for domestic deals. Theoretical and practical implications are discussed.

Determinants of M&A acquisition premium: a social capital perspective

Purpose What determines the level of acquisition premium? This paper aims to investigate the effect of acquirers’ social capital as reflected through their network position (structural holes and network density) on the level of acquisition premiums. Design/methodology/approach This study predicts acquisition premiums using a panel data set of 324 mergers and acquisition (M&A) transactions including 161 unique acquirers over a 21-year timeframe. M&A and alliance information are obtained from the securities data company platinum database; firm financial data are obtained from the COMPUSTAT database. Findings The results show that alliance network social capital provides acquiring firms with information benefits, thus, reducing the acquisition premium. However, such information benefits are also contingent on target valuation uncertainty and acquirers’ structure exploitation tendency. Practical implications Different types of network structures provide different social capital influences: managers should be aware of their advantages and pitfalls when engaging in M&As. The findings suggest that firms should pay close attention to social capital when making decisions regarding acquisition premiums. Originality/value Past research has indicated that acquiring firms tend to overestimate the value of target firms. Still, little attention has been paid to organizational-level social capital in analyzing the determinants of acquisition premiums. This study offers insight into the effect of network structure on M&A acquisition premiums.

Board interlocks and imitation in corporate acquisitions: A literature review and avenues for future research

Interlocking directorates create the conditions for social embeddedness and represent a key driver of the diffusion of strategies and practices (Okhmatovskiy & David, 2012). Among the multiple focuses of analysis, board interlocks have been regarded as a source of inter-organizational imitation in the context of corporate acquisitions (Xia, Ma, Tong, & Li, 2018; de Sousa Barros, Cárdenas, & Mendes-Da-Silva, 2021). Imitation indeed has been acknowledged as one of the primary implications of interlocking directorates (Shropshire, 2010). This study, therefore, offers an in-depth summary and discussion of how interlocks of business elites influence corporate acquisitions. Multiple contributions are provided. First, the paper develops a thematic analysis in which multiple research focuses are identified, namely acquisition activity and emphasis, acquisition timing in mergers and acquisitions (M&A) waves, acquisition process, and acquisition premium. Second, it elaborates on a number of potential avenues for future research. Specifically, it identifies three main lines of inquiry related to the imitation scope, performance at both firm- and industry-level, and potential theoretical cross-fertilizations. Moreover, methodological considerations are discussed especially in terms of operationalization choices and their implications. To the best of the author’s knowledge, this paper represents the first attempt to review the literature on the interlocks-acquisition field.

Target Firm Earnings Management, Acquisition Premium, and Shareholder Gains

Using a sample of U.S. domestic deals from 1990 to 2016, we find that bidders adjust the amount of premium paid in mergers and acquisitions (M&As) based on the levels of earnings management at target firms. However, the way a firm manipulates earnings upward matters: earnings management via real activities manipulation is more detrimental than discretionary accruals. As a result, target firms that engage in real earnings management receive lower premiums in M&As, while accruals management has no effect on premiums. Correspondingly, we find that the targets’ M&A announcement-period cumulative abnormal returns are inversely related to their level of real earnings management, while the returns are not related to accruals management. Further analyses confirm that target shareholders’ wealth is not only driven by undervaluation, expected synergy, and managerial hubris, but also reflects bidders’ perception of the target firms’ earnings quality based on real earnings management.