50+ Years of Diversification Announcements

Akbulut, Mehmet; Matsusaka, John G.

doi:10.1111/j.1540-6288.2010.00245.x

Cited by 66 publications

(8 citation statements)

References 62 publications

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“…Misallocation of capital expenditures is thus an important consideration in assessing the changes in firm value surrounding corporate asset acquisitions. Our results also complement the diversification literature, which has generally found that inefficient investment allocation partially contributes to the diversification discount, even if firms choose a diversification strategy to maximize their resource utilization or productivity (Maksimovic and Phillips, 2002; and Akbulut and Matsusaka, 2010).…”

Section: Introductionsupporting

confidence: 78%

Inefficient Investment and the Diversification Discount: Evidence from Corporate Asset Purchases

Chen¹,

Chen²

2011

Business Fin & Account

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We provide evidence that investment efficiency considerations are important in assessing changes in firm value surrounding asset purchases. We account for both the potential endogeneity in purchase decisions and the measurement error in Tobin's q. We find that post-purchase, there are significant declines in both excess value and investment efficiency. This trend occurs primarily among those firms that demonstrate increased diversity following purchases. The change in excess value for diversity-increasing buyers is positively related to the change in investment allocation surrounding the purchase.

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Section: Introductionsupporting

confidence: 78%

Inefficient Investment and the Diversification Discount: Evidence from Corporate Asset Purchases

Chen¹,

Chen²

2011

Business Fin & Account

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“…As such, M&As with related and unrelated acquisition strategies tend to produce different outcomes (Berger & Ofek, 1995). Lim and Lee (2016) show that acquisition deals adopting related M&A strategy are more likely to be completed than unrelated M&As, and the similar results are shown by some other scholars (Akbulut & Matsusaka, 2010; Slangen, 2006). It might be because investors and market believe unrelated CBAs may hurt the interest of acquiring firm's shareholders and cause diseconomies in the acquisition (Flanagan, 1996; Zhang et al., 2011).…”

Section: Literature Background and Hypotheses Developmentsupporting

confidence: 69%

Success in completing cross‐border acquisitions by emerging market firms: What matters?

Zhou

Jiang

Tam³

et al. 2021

World Economy

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While cross‐border acquisitions (CBAs) by emerging market firms (EMFs) have grown rapidly in recent years, many have failed to bring the acquisitions to completion. Compared with acquisitions initiated by acquirers from developed economies, little is known about the possible determinants of completion or abandonment of CBAs conducted by EMFs. This paper investigates what contributes to the successful completion of CBAs by EMFs. Based on data of 637 announced CBAs by Chinese firms during 2000–17, we find that investing firms’ self‐learning experience from previous acquisitions can significantly increase the completion rate of subsequent related CBAs, while their industrial spillover experience helps raise the completion rate of unrelated CBAs. Our findings also show that the value of acquisition experience is significant only when the target firm is domiciled in countries with comparable level of institutional quality. Our results provide new insights into the complexity of the global M&A market and lessons for EMFs intending to conduct CBAs in the future.

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“…We also use a set of dummy variables to control for intrastate acquisitions (Goergen and Renneboog, 2004; Moeller and Schlingemann, 2005), focused deals (i.e. bidder and target share the same 2-digit SIC code) (Akbulut and Matsusaka, 2010; Erdorf et al , 2013), listed targets (Arikan and Stulz, 2016; Brander and Egan, 2017; Netter et al , 2011) and cash-only deals (Fuller et al , 2002; Shleifer and Vishny, 2003; Travlos, 1987). Table 1 presents the summary statistics of all the above variables.…”

Section: Data and Empirical Methodsmentioning

confidence: 99%

The effect of ESG on value creation from mergers and acquisitions. What changed during the COVID-19 pandemic?

Tampakoudis

Noulas

Kiosses

et al. 2021

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Purpose The purpose of this study is to investigate the relationship between environmental, social and governance (ESG) performance and shareholder wealth in the context of mergers and acquisitions (M&As) before and during the coronavirus (COVID-19) pandemic. Design/methodology/approach This paper uses a sample of 889 completed M&As announced by US firms between 1 January 2018 and 31 July 2020. Announcement abnormal returns are estimated using an event study methodology and the relation of ESG performance to shareholder value creation is tested with univariate and multivariate cross-sectional regressions. Findings This study provides evidence for a significant negative value effect of ESG performance for the shareholders of acquiring firms during the entire sample period. The negative effect appears to be stronger, as the onset of the COVID-19 crisis. This suggests that, during the pandemic-driven economic turmoil, the costs of sustainability activities outweigh any possible gains, providing evidence in support of the overinvestment hypothesis. Research limitations/implications The results of the study have important implications for firms, investors and policymakers. Firms should be more cautious with regard to extensive investments in ESG activities, particularly during economic turmoil. For shareholders, the results suggest that ESG engagement is not a resilience factor in an exogenous shock such as the COVID-19 pandemic. In terms of policymaking, the sustainability disclosure framework should remain voluntary allowing firms to report material ESG-related issues. The main limitation of the study is related to data availability regarding ESG performance. Originality/value To the best of the knowledge, this is the first study that investigates the effect of ESG performance on shareholder value in the market for corporate control before and during the COVID-19 pandemic.

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50+ Years of Diversification Announcements

Cited by 66 publications

References 62 publications

Inefficient Investment and the Diversification Discount: Evidence from Corporate Asset Purchases

Inefficient Investment and the Diversification Discount: Evidence from Corporate Asset Purchases

Success in completing cross‐border acquisitions by emerging market firms: What matters?

The effect of ESG on value creation from mergers and acquisitions. What changed during the COVID-19 pandemic?

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