Do more mergers and acquisitions create value for shareholders?

Li, Samuel; Liu, Guy S.; Gregoriou, Andros

doi:10.1007/s11156-020-00908-7

Cited by 6 publications

(2 citation statements)

References 89 publications

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“…The link between multiple acquisitions and overconfidence can also be traced to the notion that overconfidence increases the likelihood of succeeding in contests. More recently, Li et al ( 2021 ) analyse the difference in the time between M&A deals in 81 countries and document that multiple mergers undertaken in a short span of time generate lower abnormal returns. However, none of these extant studies have examined the effect of managers’ overconfidence on M&A in the post-financial crisis phase in the UK, which was characterised by significant regulatory overhaul, and this study addresses that gap.…”

Section: Literature Reviewmentioning

confidence: 99%

Board overconfidence and M&A performance: evidence from the UK

Brahma

Boateng

Ahmad

2023

Rev Quant Finan Acc

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This paper investigates the relationship between board overconfidence and mergers and acquisitions (M&A) performance based on 754 M&A deals in the UK from 2002 to 2018. Employing three proxies to measure overconfidence, namely, fraction of male directors on the board, multiple acquisitions and merger characteristics, our results suggest that a higher fraction of male directors on the board and multiple acquisitions lead to poor M&A performance. The results also show that multiple acquirers’ deals generate higher returns than subsequent deals and this is due to self-attribution bias. In terms of merger characteristics, this study has found that, when overconfident acquirers use cash as the method of payment or when they embark on diversifying M&A, it leads to poor M&A performance. The results are robust across both univariate and multivariate analyses and also across alternate measures of post-merger performance. The findings of this study have important policy implication with regard to the ratio of male directors, number of acquisitions and the method of payment.

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Section: Literature Reviewmentioning

confidence: 99%

Board overconfidence and M&A performance: evidence from the UK

Brahma

Boateng

Ahmad

2023

Rev Quant Finan Acc

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“…The results showed that several financial measures failed to generate short-term operating benefits in the year before and after the merger event. An analysis of 24,263 M&A from 81 countries worldwide over 19 years found that the higher the number of M&A, the lower the abnormal returns [ 14 ]. Galariotis et al [ 15 ] evaluated the M&A performance of 43 listed commercial banks in 8 countries using data envelope analysis (DEA method) and found that M&A would have a negative impact on the efficiency level of “strong” and “weak” banking systems regardless of whether banks participated in one or more M&A.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Is state-owned enterprise merging private enterprise “market choice” or “space crowding” ? —Based on the motives of equity transfer of mixed-ownership enterprises

Mei-sheng

Guo

Hussain

et al. 2023

Heliyon

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Ownership, institutions, and the agency of M&A completion

Lindner,

Müllner,

Puhr

2023

Global Strategy Journal

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Research SummaryIn this paper, we study how variations in debt and equity ownership and the institutions that govern interactions between different types of principals and agents affect the completion likelihood of acquisitions. Using a sample of 55,722 acquisitions, our study finds that risk‐averse debtholders reduce the completion likelihood of acquisitions. When acquisitions cross borders, the acquiring capital providers become exposed to institutional environments that have evolved to prioritize different ideologies or principals because of the structure and customers of local capital markets. As a result, institutional duality in home and target countries reduces the completion likelihood of acquisitions. Our study integrates varieties of capitalism arguments and firm‐level agency conflicts and highlights the theoretical importance of capital markets and their concentration.Managerial SummaryAn acquisition is a highly consequential negotiation process between managers and capital providers of a firm. Based on their evaluation of a potential deal, managers propose acquisitions to capital providers who either accept it or pressure managers into withdrawing from the announced deal. This study considers firms' capital structure and cross‐national differences in the governing institutions to explain the resistance of capital providers against announced acquisitions. In particular, it points to the fear of capital providers losing control of their firms as a driver of their resistance against cross‐border acquisitions. However, when a favorable capital‐market structure in the target's home country alleviates the fears of capital providers, their resistance weakens.

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Do more mergers and acquisitions create value for shareholders?

Cited by 6 publications

References 89 publications

Board overconfidence and M&A performance: evidence from the UK

Board overconfidence and M&A performance: evidence from the UK

Is state-owned enterprise merging private enterprise “market choice” or “space crowding” ? —Based on the motives of equity transfer of mixed-ownership enterprises

Ownership, institutions, and the agency of M&A completion

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