Corporate takeovers, method of payment, and bidding firms' shareholder returns: Australian evidence

Bellamy, David E.; Lewin, Walter M.

doi:10.1007/bf01732892

Cited by 28 publications

(22 citation statements)

References 19 publications

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“…Similar results are reported by Amihud et al (1990) and Franks et al (1991). The Australian evidence provided in Bellamy and Lewin (1992) shows that cash bidders earn insignificant returns on the announcement day, compared with significant negative returns for bidders that offer equity. Da Silva Rosa et al (2000) report similar results, however, the difference between announcement returns for cash and equity bidders is insignificant.…”

Section: Regulation and Prior Researchsupporting

confidence: 78%

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Capital gains taxation and shareholder wealth in takeovers

Bugeja

Rosa

2010

Accounting & Finance

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Before December 1999, the capital gains of shareholders who sold their shares into Australian takeovers have been taxable irrespective of payment method. Subsequently, shareholders can elect to rollover capital gains in equity takeovers. We examine the effect of this change on the association between target shareholder capital gains and bidder and target firm shareholder wealth. The results indicate that prior to the regulatory change, cash consideration results in higher target shareholder returns for non-taxation reasons. After the introduction of capital gains tax rollover relief, we find that target and acquiring firm shareholders earn lower returns when cash consideration is offered to shareholders with greater capital gains. Copyright (c) The Authors. Journal compilation (c) 2009 AFAANZ.

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Section: Regulation and Prior Researchsupporting

confidence: 78%

“…For acquiring firm shareholders, prior studies generally find that cash bidders earn insignificant abnormal returns, whilst equity bidders have significant negative returns (e.g. Travlos, 1987; Bellamy and Lewin, 1992).…”

Section: Introductionmentioning

confidence: 99%

Capital gains taxation and shareholder wealth in takeovers

Bugeja

Rosa

2010

Accounting & Finance

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“…The abnormal return to each sample firm for a given period is calculated by subtracting the return to the All Ordinaries Accumulation Index (AOAI) from the sample firm's return expressed as a price relative. The use of the AOAI as the proxy for expected returns is consistent with earlier Australian takeover studies (Bellamy & Lewin 1992;Bugeja & Walter 1995;da Silva Rosa, Izan, Steinbeck & Walter 2000).…”

Section: Short Run Abnormal Returnssupporting

confidence: 80%

Market Returns to Acquirers of Substantial Assets

Rosa

Nguyễn²,

Walter

2004

Australian Journal of Management

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Does poor post-acquisition performance characterise firms that make non-M&A acquisitions? We investigate the wealth effects of substantial asset acquisitions (i.e. acquisitions that cost over $10 million) on acquiring firms' shareholders. We find significant abnormal positive market reaction to asset acquisition announcements and, contrary to findings for firms undertaking M&As, the acquiring firms perform exceptionally well post-acquisition. Our findings are robust to the research method weaknesses common to many studies of long-term performance and we control for free-cash-flow as well. Our results contradict the hubris hypothesis of acquisitions and lend weight to the argument that the auction-style process that characterizes corporate takeover bids contributes to overpayment.

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“…The market-signaling role of the means of payment was also studied within several event-study works (Travlos, 1987;Amihud, Lev and Travlos, 1990;Bellamy and Lewin, 1992, Martin 1996, Houston and Ryngaert, 1997. The acceptance of a payment with shares by the target's shareholders signals favorable perspectives of future profits.…”

Section: Signaling Asymmetry Of Information and Risk Sharing Explanamentioning

confidence: 99%

Corporate acquisition process: Is there an optimal cash-equity payment mix?

Bruslerie

2012

International Review of Law and Economics

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Abstract:This paper examines the combination of cash and share payments proposed in the corporate acquisition process. Particularly, it analyzes the conditions of an optimal mixed payment in the context of an asymmetry of information. Using a model, we highlight that setting the conditions of payment is an endogenous part of a takeover agreement between the acquirer and the target. Our contribution is to show how, in the acquisition process, the setting of the cash percentage is a key element for conveying private information on the gains of synergy and the gains that result from the transaction. In our model, we internalize asymmetries of information and possible exaggeration biases. Both will influence the joint setting of a mixed payment scheme.

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Corporate takeovers, method of payment, and bidding firms' shareholder returns: Australian evidence

Cited by 28 publications

References 19 publications

Capital gains taxation and shareholder wealth in takeovers

Capital gains taxation and shareholder wealth in takeovers

Market Returns to Acquirers of Substantial Assets

Corporate acquisition process: Is there an optimal cash-equity payment mix?

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