Mergers and Acquistions

1. Introduction & Overview. 2. 'The Economist Cases: How Mergers Go Wrong. PART I: GROWTH BY M&A. 3. Henry Manne: Merger & Market for Corporate Control. 4. Michael C Jensen: Take-overs: folklore & science. 5. H Donald Hopkins: Cross Border Mergers & Acquisitions, global & regional perspectives. 6. Bruce Kogut: Joint Ventures and the Option to Acquire. 7. Harry G Barkema & Freek Vermeulen: International Expansion through Start-up or Acquisition, a learning perspective. PART II: MOTIVES AND TARGETS. 8. HG Baumann: Merger Theory, Property Rights and the Pattern of US Direct Investment in Canada. 9. Russell W Coff: How Buyers Cope with Uncertainty when Acquiring Firms in Knowledge-Intensive Industries, caveat emptor. 10. Tomi Laamanen: Option Nature of Company Acquisitions Motivated by Competence Acquisiton. 11. Andrew C Inkpen, Anant K Sundaram & Kristin Rockwood: Cross-Border Acquisition of US Technology Assets. PART III: STRATEGIC PLANNING, TACTICS AND VALUATION. 12. Michael Keen...

The purpose of this study is to assess the efficiency determinants of mergers and acquisitions (M&A) in the context of Latin American airlines based on business-related variables commonly found in the literature. The idea is to identify preferable potential airline matches in light of fleet mix, ownership structure, and geographical proximity. Design/Methodology/Approach In order to achieve our objective, all possible combinations of M&A pairs are considered in the analysis, which is developed in a two-stage approach. First, the M&A Data Envelopment Analysis (DEA) model efficiency and returns-to-scale estimates are computed. Then, Robust Regression and Multinomial Logistic Regression are respectively used to discriminate these estimates in terms of such business-related variables. Findings The results reveal that these different contextual variables significantly impact virtual efficiency and returns-to-scale levels. Private ownership, passenger focus, and a better match between aircraft size and demand for flights appear to be key drivers for merged airline efficiency. Research limitations/implications The study makes theoretical contributions, though limited to analyzing Latin American airlines only. The use of bootstrapped robust/multinominal logistic regression, compared to the methods adopted by previous literature studies, generates more accurate and robust results related to the efficiency drivers due to its special feature and ability to allow the discrimination of increasing, decreasing, and constant returns to scale in light of a given set of contextual variables.

Purpose Motivated by the findings of Bhabra and Hossain (2017) that highlight an improvement in US market performance in the post-Sarbanes–Oxley (SOX) period, this paper aims to investigate how this change varies with the methods of payment used for the deals. Design/methodology/approach Deductive in nature and using an event study approach, this paper uses a sample of 675 deals between 1999 and 2006 to test three research hypotheses in a pre-post setting. Findings Results show that at the aggregate level, there is a significant improvement in the market performance of US acquirers around the announcement day in the aftermath of the passage of SOX 2002. Considered separately, both US stock acquirers and cash acquirers did not experience any significant improvement in market performance in the post-Sarbanes–Oxley period. These results are robust to controlling for governance, firm and deal variables, as well as industry and year fixed effects. Research limitations/implications Explor...

This paper examines whether shareholder value-maximizing corporate governance mechanisms assist in reducing the managerial incentive to enter value-destroying bank acquisitions. We find that diversifying bank acquisitions earn significantly negative announcement period abnormal returns (AR) for bidder banks whereas focusing acquisitions earn zero AR. We then find that corporate governance variables (such as CEO share and option ownership and a smaller board size) in the bidding bank are less effective in diversifying acquisitions than in focusing acquisitions. These results are robust to the inclusion of the usual control variables.

Overboarded directors (i.e., those serving on too many boards) have come under recent attack. The accusation is that such directors are ‘stretched’ by several directorships and therefore cannot fulfil their governance responsibility. This study investigates the impact of overboarded directors upon key strategic decisions such as corporate acquisitions. Based on our examination of acquisition outcomes, we found that such directors are important sources of knowledge and enhance acquisition performance. Moreover, they represent an important complement to inside and non‐overboarded outside directors.

This study explores sources of acquirer satisfaction and achievement of strategic objectives following acquisitions. We develop two sets of factors based on picking and deploying target resources that we expect will affect these outcomes, and consider how the two interact. We find that target reputation is consistently related to desirable acquisition outcomes. In particular, product quality and financial reputation positively affect satisfaction; product quality is a strong predictor of achieving market-based objectives; and management and product reputation facilitate learning. Retaining top management after the transaction is also positively related to satisfaction. We support and extend the theory of relative standing-target executives are retained to a greater degree when management reputation is strong, and this leads to better outcomes for acquirers. Other deployment effects vary depending on the outcome and the strength of the acquired resource.

Purpose-The capital markets witness phenomenal shifts of corporate control. With the shift of world economy into a global one, there has been a rapid increase in the volume of acquisitions. The previous studies shed light on the motives behind acquisition and impact of acquisition on both bidding and target firms. The purpose of this study is to bridge a gap in literature by exploring the factors affecting the acquisition ability (AA) of the firms. The study has analyzed the role of financial strength, corporate governance and regulatory influence on AA of acquiring firm. Design/methodology/approach-Cross-sectional data has been analyzed with respect to Pakistan stock exchange for a period of 2004-2017 by using logit regression. Findings-Analysis indicates that firm-specific variables are important determinants in firm's decision to acquire. Chief Executive Officer duality and presence of institutional shareholders on the board contribute to this important phenomenon in the life of the acquiring firms. Bidding firm's financial strength is also another important consideration while going for corporate control transfer transactions. The empirical results indicate the better AA for firms characterized by minimum capacity usage, lower level of intangible assets, lower debt levels and lower advertising expenses. However, the regulatory factor has no significant role in firms' AA. The findings of the study are helpful for managers, regulators and policymakers. Originality/value-Analyzing the role of financial strength, corporate governance and regulatory influence on AA of acquiring firm is a rare study, especially in an emerging country such as Pakistan.

We model a competitive industry where managers choose quantities and costs to maximize a combination of firm profits and private benefits from expropriation. Expropriation is possible because of corporate governance 'slack' permitted by the government. We show that corporate governance slack induces managers to choose levels of output and costs that are higher than would otherwise be optimal. This, in turn, benefits consumers because the equilibrium price is lower. The model shows that for every economic system, and depending on industry structure and the government's objective, there is an optimal level of expropriation that maximizes social welfare. Some mechanisms suggested by the literature as effective at improving investor protection-legal change, firms voluntarily opting into more protective systems, domestic mergers-do not work once competition is considered. We provide a theoretical argument showing the efficacy of cross-border mergers. The stronger corporate governance of a foreign acquirer, imposed on the domestic target firm, benefits merging shareholders and those of competing unmerged domestic firms.

This is a PDF file of an article that has undergone enhancements after acceptance, such as the addition of a cover page and metadata, and formatting for readability, but it is not yet the definitive version of record. This version will undergo additional copyediting, typesetting and review before it is published in its final form, but we are providing this version to give early visibility of the article. Please note that, during the production process, errors may be discovered which could affect the content, and all legal disclaimers that apply to the journal pertain.

Previous research has investigated the links between Mergers and Acquisitions (M&As) and the monetary magnitude of executive compensation, but failed to inquire how the adoption of specific attributes of compensation contacts relates to M&A activities. We address this gap in the literature by examining the impacts of some M&A characteristics and acquirers' features on the adoption of executive compensation protection provisions and new Long-Term Incentive Plans (LTIPs). The study adopts a longitudinal design before-after M&A deals for 80 Canadian acquiring companies that engaged in M&A activities between 1995 and 2001. Our findings suggest that both transactional and organisational characteristics significantly explain the executive compensation arrangements' adoption around M&A transactions, but that the adoption of new LTIPs is subjected to a different set of determinants than the adoption of compensation protection provisions. We interpret these results in the light of the agency, political and institutional perspectives.

Mergers and acquisitions have been a popular strategy, but the research suggests that acquiring firms create little or no value. Reasons for these outcomes include an inability to create synergy, paying too high a premium, selecting inappropriate targets, and ineffective integration processes, among others. However, careful selection of targets and effectively implemented acquisitions can achieve synergy and create value. For example, targets selected that have capabilities complementary to those held by the acquiring firm provide the greatest opportunity for synergy creation. Acquisitions that provide new knowledge to the acquiring firm that can be used to enhance its competitive position often create value. For example, the knowledge gained from acquisitions can enhance innovation when the target firm has complementary science and technology to that held in the acquiring firm. In addition, cross-border acquisitions present significant opportunities, but they also provide more complex challenges for achieving synergy and creating value. Finally, research shows that executives frequently have trouble admitting failure and divesting acquisitions.

Studies on post-acquisition or integration stage of acquisition process have revealed that increase in number of acquisitions results in diminishing contribution to the performance of a firm and increasing inefficiency of the system, which, at times, calls for organizational restructuring. Although disruptive in the short-run, organizational restructuring has been effective in realization of synergy benefits from acquisitions. The post-acquisition studies mostly assume strategic fit, the focus of pre-acquisition activities, to which contradictory evidence exists. Incorporating pre-acquisition or selection stage activities in post-acquisition activities may provide a better understanding of how corporation can realize synergy benefits from acquisitions.

We examine whether experience from prior divestitures is associated with higher completion likelihood in subsequent acquisitions. We argue that through divestitures, firms could extract meaningful knowledge that is helpful for completing their acquisitions, such as a general understanding of acquisition deal-making stages, and the stories and aims of the target in an M&A transaction. In addition, viewing divestitures as the flipside of acquisitions, we conjecture that the selling firm can observe how the divested component of their business is acquired, and vicariously learn from these observations. We also investigate the relative importance of learning from divestiture visa -vis acquisition experience in determining acquisition deal completion. Finally, we contend that the effect of learning from divestitures on acquisition deal completion depends on acquisition experience and deal value. We find evidence supporting our conjectures in a sample of 2164 M&A transactions from the worldwide computer and printing industries between 1991 and 2010.

Adopting a governance perspective, this study analyzes the merger between closely-held Donohue Inc. and widely-held Abitibi-Consolidated Inc. Findings suggest that the absence of a controlling shareholder and weak board governance at Abitibi might explain both (a) its executives' interests in the transaction and (b) its CEO's compensation increase despite underperformance. Second, an intergeneration shift of control at Quebecor (Donohue's parent company) led to a strategic reorientation that (a) transformed Donohue into a target and (b) insured that Donohue's executives had incentives to pursue a deal. Finally, Donohue's noncontrolling shareholders benefi ted from the transaction while Abitibi shareholders experienced wealth reduction. The merger's aftermath provides some counter evidence regarding blockholders' power in widely-held fi rms. Copyright

Tenure is an important component of mergers and acquisitions (M&A) outcomes, as highlighted in this study and recent studies by Zhao (2022) and Bilgili, Calderon, Allen, and Kedia (2017). Research on top management teams (TMTs) has found that a good work relationship between senior managers enhances team cohesiveness, communication, and firm performance. This study explores the impact of the joint tenure of the chairperson and the CEO on M&A outcomes. We utilised the resource-based view (RBV), upper echelon theory, and season of tenure theory as theoretical lenses to explore joint tenure’s potential impact on M&A outcomes. Through a long-event window research methodology, which examines the cumulative abnormal returns to the acquirer’s shareholders for a period of three years following the completion date, this study found that the length of the period of joint tenure of the chairperson and CEO in acquiring firms was significantly positively correlated with the cumulative abnormal r...

We examine whether experience from prior divestitures is associated with higher completion likelihood in subsequent acquisitions. We argue that through divestitures, firms could extract meaningful knowledge that is helpful for completing their acquisitions, such as a general understanding of acquisition deal-making stages, and the stories and aims of the target in an M&A transaction. In addition, viewing divestitures as the flipside of acquisitions, we conjecture that the selling firm can observe how the divested component of their business is acquired, and vicariously learn from these observations. We also investigate the relative importance of learning from divestiture visa -vis acquisition experience in determining acquisition deal completion. Finally, we contend that the effect of learning from divestitures on acquisition deal completion depends on acquisition experience and deal value. We find evidence supporting our conjectures in a sample of 2164 M&A transactions from the worldwide computer and printing industries between 1991 and 2010.

Chapter 2: Twice as smart or too clever by half? TMT international orientation and announcement returns of cross-border acquisitions………………………………………… 18 2.1 Introduction…………………………………………………………………………..18 2.2 Theoretical background………………………………………………………………21 2.2.1 The role of country characteristics……………………………………………….22 2.2.2 The role of experience in mitigating information asymmetry……………………22 2.2.3 The role of decision makers: focus on TMTs…………………………………….23 2.2.4 TMT international orientation……………………………………………………24 2.3 Research hypotheses…………………………………………………………………26 2.4. Sample and methodology……………………………………………………………30 2.4.1 Dependent variable……………………………………………………………….31 2.4.2 Independent variables…………………………………………………………… 33 2.4.3 Control variables…………………………………………………………………33 2.5 Descriptive statistics………………………………………………………………….36 2.6 Results………………………………………………………………………………..37 2.6.1 Univariate analysis……………………………………………………………….37 2.6.2 Multivariate results……………………………………………………………….38 2.7 Additional analyses regarding TMT international orientation……………………….41 2.8 Further robustness tests………………………………………………………………43 2.9 Discussion and conclusion…………………………………………………………...44 4.7 Sample and methodology…………………………………………………………...122 4.7.1 Dependent variable……………………………………………………………...123 4.7.2 Independent variables…………………………………………………………...123 4.7.3 Control variables………………………………………………………………..124 4.8 Results………………………………………………………………………………128 4.9 Additional analyses for robustness checks……………………………………….....132 4.9.1 Other TMT characteristics: size, age and tenure………………………………..132 4.9.2 Relative deal size………………………………………………………………..133 4.9.3 Prior firm-level acquisition experience…………………………………………134 4.9.4 Target-country-specific knowledge……………………………………………..135 4.9.5 Clustering at bidder-level and target country-level……………………………..135 4.9.6 Excluding financial firms………………………………………………………..136 4.10 Discussion and conclusion………………………………………………………...136 Chapter 5: Moderating effects of TMT international orientation on announcement outcomes of serial acquirers.

This research study investigates the impact of top management team diversity (TMT) on the quality of acquisition decisions as reflected in announcement returns to acquirer shareholders. Firms pursue acquisitions with the strategic rationale of increasing shareholder value, improving market share, and achieving economies of scale. Despite these compelling motivations, acquisitions have not always yielded the desired results in terms of increasing shareholder value. This is generally attributed to poor decision making on the part of the TMT. Upper Echelons Theory suggests that TMT decision quality is enhanced when team members come from diverse backgrounds as they bring diversity of opinions and resource knowledge which allow for a more robust sharing of ideas and viable alternatives. Therefore, this study focuses on TMT diversity traits the dimensions of gender diversity, age diversity, job diversity, cultural diversity, tenure diversity, and political affiliation diversity and how t...

Tenure is an important component of mergers and acquisitions (M&A) outcomes, as highlighted in this study and recent studies by Zhao (2022) and Bilgili, Calderon, Allen, and Kedia (2017). Research on top management teams (TMTs) has found that a good work relationship between senior managers enhances team cohesiveness, communication, and firm performance. This study explores the impact of the joint tenure of the chairperson and the CEO on M&A outcomes. We utilised the resource-based view (RBV), upper echelon theory, and season of tenure theory as theoretical lenses to explore joint tenure’s potential impact on M&A outcomes. Through a long-event window research methodology, which examines the cumulative abnormal returns to the acquirer’s shareholders for a period of three years following the completion date, this study found that the length of the period of joint tenure of the chairperson and CEO in acquiring firms was significantly positively correlated with the cumulative abnormal r...

By examining the premiums paid by acquiring firms in cross-border acquisitions (CBAs), this study aims to determine why they might rely on prior premium decisions in the host market rather than rigorous assessments of the deal. An information-based imitation framework offers an explanation for foreign acquirers' premium decisions. The developed hypotheses are tested with 2350 CBAs that occurred during 1995-2008. The results show that the premium paid by acquiring firms in CBAs relates positively to prior premiums paid by foreign acquirers in that host country. This imitation behavior is influenced by both organization-and offering-level characteristics.

The aim of this study is to explain the performance consequences of the adoption of a Chief Operating Officer (COO) position by drawing from agency theory. Although, prior research has documented a performance penalty associated with the use of this position, we currently have an incomplete understanding of the factors explaining this penalty. This study suggests that the delegation of CEO decision rights to the COO is explained by information transfer and agency considerations. Largely consistent with agency theory, our empirical analysis suggests information transfer considerations are related to the likelihood of COO adoption, while CEO ownership and board characteristics mitigate the related performance penalty.

Tenure is an important component of mergers and acquisitions (M&A) outcomes, as highlighted in this study and recent studies by Zhao (2022) and Bilgili, Calderon, Allen, and Kedia (2017). Research on top management teams (TMTs) has found that a good work relationship between senior managers enhances team cohesiveness, communication, and firm performance. This study explores the impact of the joint tenure of the chairperson and the CEO on M&A outcomes. We utilised the resource-based view (RBV), upper echelon theory, and season of tenure theory as theoretical lenses to explore joint tenure’s potential impact on M&A outcomes. Through a long-event window research methodology, which examines the cumulative abnormal returns to the acquirer’s shareholders for a period of three years following the completion date, this study found that the length of the period of joint tenure of the chairperson and CEO in acquiring firms was significantly positively correlated with the cumulative abnormal r...

We examined CEO attributes, board composition, and ownership structure for their relationship to the share performance of the acquiring company around the acquisition announcement. Based on 273 acquisitions by Canadian firms from 1998 through 2002, we have shown that the levels of CEO and director ownership as well as the level of board independence were positively associated with the short-term financial performance of the acquirer. Board size was negatively related to value creation. Finally, cash-based deals and cross-border transactions were also positively related to increases in shareholder wealth for the acquirer. Copyright

We find that firms that treat their employees better are less likely to be acquired. The shareholders of employee-friendly targets also receive lower premiums and smaller share of the surplus created by the deal. We also show that bidders tend to improve their employee policy following the acquisition of R&D-intensive targets. Furthermore, the improvement of employee policy is stronger when bidders increase their R&D expenditures in the new firm. The most likely explanation of our results is the importance of human capital in the production process. The agency conflict between managers and shareholders does not seem to be an important factor for employee policy.

Corporate mergers and acquisition has become a highly popular strategy in recent years. Thus, much attention has been focused on its outcomes. It has served as a substitute for innovation, a greater means of diversification. The banking sector is often referred to as an engine growth of the economy. The intermediation role which the sector plays in national development cannot be overemphasized. Thus, given the recent consolidation exercise in the Nigerian banking sector, we explored the impact of mergers and acquisition on managerial commitment in this paper. We adopted the descriptive survey method and primary data were obtained using oral interview and questionnaire. The population of this study comprised all consolidated banks in Nigeria and the total sample size for this study was 384 respondents from commercial banks in South East Nigeria. The Chi-square (X 2) non-parametric statistic was used to test the hypotheses. The results revealed that mergers and acquisitions have significant positive effect on managerial role and commitment of managers of commercial banks in Nigeria's South East Region. We, therefore, recommend that incentive measures such as improved pay and good working environment should be promoted in commercial banks during mergers and acquisitions as these will further enhance managerial commitment.

The prevalent finding on acquirer performance is a pattern of declining announcement returns over successive deals, which contradicts the claim of practitioners and the management literature that acquirers learn from their acquisition experience. We study a sample of 6,906 UK acquisitions completed between 1985 and 2004 and control for previous deals similarities, which other studies ignore. We find that returns for frequent acquirers decrease constantly but they remain positive through high order deals. Controlling for deal characteristics, we still do not detect an improving pattern of returns but, at best, a stable one when the deal is settled for cash. Our logistic regressions show that learning is possible only if prior mistakes are observed in designing the method of payment and estimating synergies, among other variables. We find evidence of learning for acquirers with unsuccessful first acquisition, while successful first time bidders are more likely to exhibit hubris behavior as they are more likely to lose in the second acquisition after first time success.

The version presented here may differ from the published version or, version of record, if you wish to cite this item you are advised to consult the publisher's version. Please see the 'permanent WRAP URL' above for details on accessing the published version and note that access may require a subscription.

The failure of corporate-control transactions as strategic-oriented transactions to create significant values for their stockholders has triggered the management to deal with these phenomena by setting the right and best strategies and at the same time, to ensure company's growth in the future. This study tests empirically the implication of corporate-control transaction announcement on companies’ abnormal returns. Particularly, this study investigates the effect of the announcement of corporate-control transactions’ type (merger and acquisition, sell-off, joint venture, alliance) and focus (transformative or expansionist). It used the event study of 94 corporate-control transactions, which contains of transactions’ type and focus of during 1991-2001 periods. By using multivariate regression analysis, the results show that the announcement of corporate-control transactions significant and positively influence the cumulative abnormal return. Meanwhile, the announcement of t...

Prior research finds that firms hire directors for their acquisition experience, regardless of acquisition quality (whether their prior acquisitions earned positive or negative announcement returns). Using several short-and long-run measures, we examine the effects of directors' acquisition experience on the acquisition performance of firms hiring them. We find that board acquisition experience is positively related to subsequent acquisition performance, demonstrating that firms appropriately value experience. Beyond experience itself, however, the quality of directors' prior acquisitions is also important. Our results suggest that firms may be better served to select directors based upon both past acquisition experience and acquisition performance.

Purpose Motivated by the findings of Bhabra and Hossain (2017) that highlight an improvement in US market performance in the post-Sarbanes–Oxley (SOX) period, this paper aims to investigate how this change varies with the methods of payment used for the deals. Design/methodology/approach Deductive in nature and using an event study approach, this paper uses a sample of 675 deals between 1999 and 2006 to test three research hypotheses in a pre-post setting. Findings Results show that at the aggregate level, there is a significant improvement in the market performance of US acquirers around the announcement day in the aftermath of the passage of SOX 2002. Considered separately, both US stock acquirers and cash acquirers did not experience any significant improvement in market performance in the post-Sarbanes–Oxley period. These results are robust to controlling for governance, firm and deal variables, as well as industry and year fixed effects. Research limitations/implications Explor...

This study investigates the value of customer/supplier relationships in mergers and acquisitions. The findings indicate that targets (suppliers) with strong customer/supplier relationships obtain higher abnormal returns and higher merger premiums when compared to targets with weak customer/supplier relationships. However, targets with a strong connection to a customer have a lower chance of being acquired. Acquirers that purchase targets with strong customer/supplier relationships have negative long run abnormal returns suggesting that the acquirers may have overpaid for these targets. The implications of customer/supplier relationships on customers, rivals, and competing rivals are presented.

We analyze 635 US M&A transactions from 1985 to 2004. In contrast with prior research, we distinguish between the target and acquirer fees, and examine their independent effects on the level of the merger premium. The study provides evidence of a positive (negative) association between target (acquirer) fees and the level of the premium. It indicates that the reputation of investment banks affects the level of merger fees, but does not affect the level of the premium. The findings confirm the conflict of interests between target and acquirer firms where the investment banks' efforts are positively related to shareholders' interest. The study also finds that when acquirers pay higher fees than target firms, they pay lower premiums. The findings also imply that for the small proportion of mergers (13%) resulting in relatively large value gains for buying firms, an acquirer might be willing to pay large advisory fees even though this may result in a higher premium.

This paper studies announcement returns in a sample of 3,667 mergers over the last 55 years in order to shed light on the causes of the waning of corporate diversification. The abnormal combined (acquirer + target) return from diversifying mergers declined over time, consistent with the idea that diversification fell from favor in the 1980s. The market rewarded mergers involving financially constrained firms before but not after 1980, consistent with a declining value of internal capital markets. Announcement returns changed less for large firms than small firms, suggesting antitrust was not a key factor. Diversifying mergers earned positive combined returns throughout the period, and bidder returns were nonnegative before 1980, suggesting diversification was not a valuedestroying outgrowth of agency problems. Comments welcome. We thank Oguzhan Ozbas, Richard Roll, and workshop participants at USC for helpful suggestions, and USC for financial support.

This paper studies announcement returns from 4,764 mergers over 57 years to shed light on several controversies concerning corporate diversification. One prominent view is that diversification destroys value because of agency problems or internal investment distortions, but we find that combined (acquirer plus target) announcement returns are significantly positive for diversifying mergers throughout the period, and no lower than the returns for related mergers. The returns from diversifying acquisitions fell after 1980, and investors rewarded mergers involving financially constrained firms before but not after 1980, consistent with the idea that the value of internal capital markets declined over time.

We examine whether firms belonging to Korean business groups ~chaebols! benefit from acquisitions they make or whether such acquisitions provide a way for controlling shareholders to increase their wealth by increasing the value of other group firms ~tunneling!. We find that when a chaebol-affiliated firm makes an acquisition, its stock price on average falls. While minority shareholders of a chaebolaffiliated firm making an acquisition lose, the controlling shareholder of that firm on average benefits because the acquisition enhances the value of other firms in the group. This evidence is consistent with the tunneling hypothesis. RECENT EMPIRICAL EVIDENCE SUGGESTS that business groups in developing countries can facilitate efficient allocation of capital and managerial resources. Khanna and Palepu ~1997, 2000! argue that business groups in developing countries mimic the beneficial functions of market mechanisms that are present only in advanced economies. When a particular market mechanism is not well developed or accessible, a business group can add value by providing member firms with alternative means of overcoming problems. For example, when a country 's external capital market is not well developed, the operation of an internal capital market within a business group enables those firms with the best projects within the group to obtain resources. 1 However, the structure of diversified business groups may create agency problems. In most business groups, ownership is highly concentrated, and * Bae is from the College of Business Administration, Korea University, and Kang and Kim are from the Eli Broad College of Business, Michigan State University. We are grateful for comments from Ted Fee

This study adds to the literature demonstrating the adverse market reaction to acquisitions by overconfident CEOs (e.g., . In particular, it explores the parallel role played by overconfident target firm CEOs in explaining the premium paid, and value destruction in such deals, and, most importantly, the "perfect storm" of the interaction between the two overconfident parties. Our results indicate that overconfident CEOs tend to pay a higher premium in acquisitions than their non-overconfident counterparts. However, the premium paid when both acquiring firm and target firm CEOs are overconfident is between 7% to 9% higher than if neither, or only one, side of the deal manifests such behavioral bias. We also show how the adverse market reaction to deals by overconfident acquirers is augmented when target firm CEOs are similarly prone to this judgmental bias. In particular, we report how when both acquiring and target firm CEO overconfidence exist concurrently, the market marks down the acquirer"s share price on bid announcement by around 11% to 12% compared with deals where neither, or only one, party is overconfident. It is the danse macabre of overconfident acquirer and target firm CEOs that seems to lead to the greatest overpayment and loss of shareholder value in takeovers. Our results suggest that the interaction between acquirer and target firm overconfidence may provide a possible explanation for the overpayment problem, well rehearsed in the finance literature, and, in particular, help to explain the most value destructive deals.

This paper investigates the financial performance of a sample of UK firms involved in abandoned mergers during the period 197741. Predictions derived from a broadly neoclassical theory of merger activity are tested empirically and implications for the theory of the firm are discussed. Using an extension of discriminant analysis for firms in our samples we cannot find any evidence to suggest that the market for corporate control exercises discipline in completed mergers or in abandoned ones. In the latter case we suggest that the motives for takeovers tend to reflect managerial rather than shareholder interests.

Using a large sample of US acquisitions made between 1985 and 2013, we study the effect of financial constraints on acquisition gains and acquisition likelihood. Our findings show that financial constraints of target companies significantly increase acquisition premiums and abnormal returns for both parties. Our results further show that the presence of financial constraints in the target is one of the most important determinants of a takeover bid. This supports the idea that acquisitions may improve the ability of financially constrained companies to access capital through a better reallocation of resources within segments of the same company (e.g., internal capital market) or through better access to external markets. This would eventually benefit bidders too, as new capital would be invested in valuable growth opportunities that otherwise would expire unexercised.

This study investigates the value of customer/supplier relationships in mergers and acquisitions. The findings indicate that targets (suppliers) with strong customer/supplier relationships obtain higher abnormal returns and higher merger premiums when compared to targets with weak customer/supplier relationships. However, targets with a strong connection to a customer have a lower chance of being acquired. Acquirers that purchase targets with strong customer/supplier relationships have negative long run abnormal returns suggesting that the acquirers may have overpaid for these targets. The implications of customer/supplier relationships on customers, rivals, and competing rivals are presented.

This study draws on agency and stewardship theory to evaluate the relationship between alternative governance regimes (founder versus non-founder CEO) adopted at the time of going public on post-IPO economic outcomes in the market for corporate control. We find that the presence of founder CEOs reduces the likelihood of post-IPO change of control but enhances target IPO firm wealth by increasing acquisition premiums. Additionally, we examine whether measures of CEO power over the board moderate the relationship between founder management and target IPO firm wealth. Our results suggest that CEO duality is the most effective instrument of CEO power available to founder CEOs to positively influence target firm wealth. Further, we find that while founder CEOs utilize power derived from CEO duality to increase acquisition premiums, non-founder CEOs use board leadership power to expropriate shareholder wealth.

This paper investigates both short-term and long-term stock market reactions to the announcement of domestic and cross-border Mergers and Acquisitions (M&As) by Chinese acquiring companies. For short-term performance, this study uses market model methods to calculate daily abnormal return and measure how M&A deals announcement impact on stock returns. For the long-term performance, this study uses market model, capital asset pricing model and Fama-French three factor model to calculate monthly abnormal return and measure whether M&A deals create value to shareholders. This paper also examines differences in operating performance between pre-acquisition and post-acquisition, and finally investigates whether cash flow from operations, Tobin’s Q and profit margin are significantly changed by M&A deals

Mergers and acquisitions continue to be value destroying for many acquiring firm shareholders. The consequences of this value destruction can be far reaching for stakeholders such as pension funds. The assumption of a rational and efficient market does not explain some aspects of an acquirer's offer. This paper examines acquisitions in Australia between 1990 and 2006.The behavioural characteristics of the acquirer such as animal spirits, hubris, and narcissism may provide an explanation for an acquirer's offer, and hence M&A value destruction. Good corporate governance practice including greater transparency to stakeholders can help in addressing these behavioural factors.

Studies on post-acquisition or integration stage of acquisition process have revealed that increase in number of acquisitions results in diminishing contribution to the performance of a firm and increasing inefficiency of the system, which, at times, calls for organizational restructuring. Although disruptive in the short-run, organizational restructuring has been effective in realization of synergy benefits from acquisitions. The post-acquisition studies mostly assume strategic fit, the focus of pre-acquisition activities, to which contradictory evidence exists. Incorporating pre-acquisition or selection stage activities in post-acquisition activities may provide a better understanding of how corporation can realize synergy benefits from acquisitions.

In the study I examine the relationship between corporate governance and consolidation strategies for shipping firms. The analysis is focused on the ownership structure and corporate governance power which are supposed to find that corporate governance is an important factor to shape alliance and M&A strategies.

Corporate mergers and acquisition has become a highly popular strategy in recent years. Thus, much attention has been focused on its outcomes. It has served as a substitute for innovation, a greater means of diversification. The banking sector is often referred to as an engine growth of the economy. The intermediation role which the sector plays in national development cannot be overemphasized. Thus, given the recent consolidation exercise in the Nigerian banking sector, we explored the impact of mergers and acquisition on managerial commitment in this paper. We adopted the descriptive survey method and primary data were obtained using oral interview and questionnaire. The population of this study comprised all consolidated banks in Nigeria and the total sample size for this study was 384 respondents from commercial banks in South East Nigeria. The Chi-square (X 2) non-parametric statistic was used to test the hypotheses. The results revealed that mergers and acquisitions have significant positive effect on managerial role and commitment of managers of commercial banks in Nigeria's South East Region. We, therefore, recommend that incentive measures such as improved pay and good working environment should be promoted in commercial banks during mergers and acquisitions as these will further enhance managerial commitment.

Researchers face numerous challenges when measuring complex theoretical constructs. This article focuses on the tension between the benefits of measurement precision and the benefits of generalizability in the context of the acquisition performance construct. Achieving precision tends to lead to measurement proliferation, while achieving generalizability calls for measurement convergence. The authors perform qualitative and quantitative analyses to determine how the literature has dealt with this tension.They conclude that acquisition performance is a theoretically complex construct comprised of relatively unrelated dimensions and that there is often a misalignment between theory and measurement — resulting in missed opportunities to capture the benefits of precision or the benefits of generalizability. Based on their analyses, the authors’ develop a framework to help future acquisition researchers manage the tension between precision and generalizability. The approach is recommende...

Researchers face numerous challenges when measuring complex theoretical constructs. This article focuses on the tension between the benefits of measurement precision and the benefits of generalizability in the context of the acquisition performance construct. ...