Does market misvaluation drive post-acquisition underperformance in stock deals?

Lin, Hsuan Chu; Chou, Ting Kai; Cheng, Jia Chi

doi:10.1016/j.iref.2010.12.005

Cited by 24 publications

(18 citation statements)

References 49 publications

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“…Indeed, evidence in support of this implication is provided by Bouwman, Fuller, and Nain (2009), Savor and Lu (2009), Lau and Proimos (2010), and Lin, Chou, and Cheng (2011), and this is also consistent with the visual pattern in Figure 1 of this paper. Thus, we also replicate our tests within the subsamples of deals paid for with cash only and those paid for with stocks only.…”

Section: Resultssupporting

confidence: 89%

Post-Merger Returns in Frontier Markets, or How We Learned to Stop Worrying and Love the Acquirers

Zaremba

Szyszka

Płotnicki

et al. 2018

Journal of Business Economics and Management

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Abstract. This study presents the results from a comprehensive out-of-sample test of long-run returns following mergers and acquisitions (M&As). Using a unique sample from 23 frontier markets of almost 800 transactions conducted during the years 1992 to 2016, we implement both crosssectional tests and time-series examinations based on a calendar-time portfolio approach. Contrary to evidence from developed markets, the M&As in these frontier markets do not lead to abnormal underperformance of acquirers, regardless of whether they paid for the acquisition with cash or stock. The results are robust to many considerations, including subsample and subperiod analysis, alternative formation periods, different portfolio construction approaches.

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Section: Resultssupporting

confidence: 89%

Post-Merger Returns in Frontier Markets, or How We Learned to Stop Worrying and Love the Acquirers

Zaremba

Szyszka

Płotnicki

et al. 2018

Journal of Business Economics and Management

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show abstract

“…Profitability, firm growth, and productivity are also investigated as significant long-term operating performance variables related to the post-merger or post-acquisition effects (see Baldwin & Gorecki, 1991;Bhuyan, 2002;Ikeda & Doi, 1983;Lichtenberg & Siegel, 1992;McAfee & Williams, 1988;Ravenscraft & Scherer, 1989;Yep and Hoshino, 2002). In recent studies, Lin, Chou, and Chen (2011) and Ma, Whidbee, and Zhang (2011) analyze acquiring firm's underperformance over the long run focusing on changes in intrinsic value estimated by a residual income model. They show that overor mis-valuation of the acquiring firm before the transaction can contribute to underperformances in the long run.…”

Section: Literature On Mergers or Acquisitionsmentioning

confidence: 99%

The performances of acquired firms in the steel industry: Do financial institutions cause bubbles?

Huh

2015

The Quarterly Review of Economics and Finance

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“…Using a longer sample period and larger samples consisting of 324 combinations, Switzer (1996) also have found positive returns in accounting measures, with asset restructuring supporting the theoretical assumption of synergy. Misevaluation of acquirer firms can also cause poor postmerger abnormal accounting returns because, over the long term, the initial overvaluation will be corrected (Lin, Chou, & Cheng, 2011). Studies that employ the accounting-based performance evaluation approach also yield mixed results on asset-restructuring performance.…”

Section: Mixed Empirical Results On Asset-restructuring Performancementioning

confidence: 99%

Restructuring performance prediction with a rebalanced and clustered support vector machine

Hong

et al. 2018

Journal of Forecasting

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This paper discusses whether asset restructuring can improve firm performance over decades. Variation in the stock price or the financial ratio is used as the dependent variable of either short‐ or long‐term effectiveness to evaluate the variance both before and after asset restructuring. The result is varied. It is necessary to develop a foresight approach for the mixed situation. This work pioneers to forecast effectiveness of asset restructuring with a rebalanced and clustered support vector machine (RCS). The profitability variation 1 year before and after asset restructuring is used as the dependent variable. The current financial indicators of the year of asset restructuring are used as independent variables. Specially treated listed companies are used as research samples, as they frequently adopt asset restructuring. In modeling, the skew distribution of samples achieving and failing to achieve performance improvement with asset restructuring is handled with rebalancing. The similar experienced knowledge of asset restructuring to the current asset restructuring is filtered out with clustering. With the help from rebalancing and clustering, a support vector machine is constructed for prediction, together with other forecasting models of multivariate discriminant analysis, logistic regression, probit regression, and case‐based reasoning. These models' standalone modes are used as benchmarks. The empirical results demonstrate the applicability of the RCS for forecasting effectiveness of asset restructuring.

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Does market misvaluation drive post-acquisition underperformance in stock deals?

Cited by 24 publications

References 49 publications

Post-Merger Returns in Frontier Markets, or How We Learned to Stop Worrying and Love the Acquirers

Post-Merger Returns in Frontier Markets, or How We Learned to Stop Worrying and Love the Acquirers

The performances of acquired firms in the steel industry: Do financial institutions cause bubbles?

Restructuring performance prediction with a rebalanced and clustered support vector machine

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