Economic Consequences of Private Equity Investments on the German Stock Market

Achleitner, Ann‐Kristin; Andrés, Christian; Betzer, André; Weir, Charlie

doi:10.2139/ssrn.1086598

Cited by 9 publications

(12 citation statements)

References 64 publications

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“…Overall, the results are consistent with prior research. However, the observed magnitudes of the CARs and the t-values are lower compared to the results of prior event studies (see for example Pauser et al (2007) or Achleitner et al (2008)).…”

Section: Timecontrasting

confidence: 70%

“…Target returns are significantly positive, while bidder returns are statistically negative, but not to such a degree that the combined firm returns are negative. Achleitner et al (2008) investigated acquisitions of German quoted companies and found out that private equity investors generated positive wealth effects for target shareholders of 5.7 per cent at the announcement date. These positive ARs are consistent with the recent works of Brav et al (2008) and Klein and Zur (2009).…”

Section: The Model 21 Event Studymentioning

confidence: 99%

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The impact of M&A transactions from private equity and hedge funds

Wörtche

Nguyen

2011

J of Fin Reg and Compliance

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Purpose -The purpose of this paper is to study the impact of merger and acquisition (M&A) transactions from private equity and hedge funds. Owing to the recent financial and economic crisis, there is a controversial discussion about the implications of M&As from private equity and hedge funds. It is argued that acquisitions, which are driven by financial investors (FIs) like private equity and hedge funds, have solely short-term profit interests and might be under certain circumstances a source for future financial crisis. Therefore, these FIs should be regulated more severely. Design/methodology/approach -This paper examines the implications of M&As from different types of investors (FIs versus non-FIs) by analysing the wealth effects of Austrian-and Swiss target companies. The authors use the event study methodology to analyze the effects of an merger announcement to see whether the financial markets believe the merger will create or destroy value. Findings -Considering the wealth effects of the different types of investors, the findings of this paper support the necessity of special regulations for FIs such as private equity and hedge funds. This is due to the fact that lower performance is linked to the disgraceful business conduct of an FI who is oriented toward short-term profit at the cost of the target company and their stakeholders. Originality/value -This paper provided an overview of different event study methods and examined the implications of different types of investors by analysing the wealth effects of Swiss and Austrian target companies. It is the first empirical study about the impact of M&A transactions from private equity and hedge funds in Austria and Switzerland.

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Section: Timecontrasting

confidence: 70%

Section: The Model 21 Event Studymentioning

confidence: 99%

The impact of M&A transactions from private equity and hedge funds

Wörtche

Nguyen

2011

J of Fin Reg and Compliance

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“…Prior literature shows private equity bid target firms exhibit lower stock volatility and long‐term growth prospects, are larger, and exhibit greater abnormal operating income relative to other acquisition techniques. Prior studies also consider the determinants of private equity acquisitions relative to other takeover techniques at the domestic and international level (Myers and Majluf, 1984; Bargeron et al ., 2008; Achleitner et al ., 2009; Chapple et al ., 2010; Boone and Mulherin, 2011; Fidrmuc et al ., 2012; Osborne et al ., 2012). A report in the Australian Financial Review states that, ‘No single country plays a larger role in Australia's economy than the United States … it is by far the largest investor in Australia and unparalleled provider of the capital required to fuel our economy … the United States remains Australia's indispensable economic partner’ (Holden and Mondschein, 2017).…”

Section: Theoretical Backgroundmentioning

confidence: 99%

“…(2008) and Boone and Mulherin (2011), and by Achleitner et al . (2009) for continental Europe. These studies show that information contained within reported financials is important; however, corporate governance mechanisms and agency perceptions are equally important in target selection and value creation.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

Abnormal returns and asymmetric information surrounding strategic and financial acquisitions

Osborne

2019

Accounting & Finance

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Using takeover bids from the United States, we investigate the importance of information asymmetry in self‐selection when evaluating the abnormal returns of financial versus strategic takeover targets during a period of possible informed trade. Sample selection bias due to differences in financial versus strategic takeover bid information environments is controlled for using Heckman's model. Results show that takeover announcements are not randomised, indicative of timed announcements, and further that private equity firms exhibit lower price impact post‐announcement. We conclude that the long‐term financial motive of private equity takeovers, coupled with higher private information pre‐announcement, leads to lower abnormal returns post‐announcement.

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“…In the latter case, the significant drivers for investment are often indirectly redesigned by means of an event study (e.g. Achleitner et al, 2008).…”

Section: Introductionmentioning

confidence: 99%

Are Private Equity Investors Good or Evil?

2009

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Are Private Equity Investors Good or Evil? * Oleg Badunenko, Nataliya Barasinska, and Dorothea Schäfer † The paper investigates the motives of activity (entry and exit) of Private Equity (PE) investors in European companies. Investment of a PE firm is not viewed unambiguously. First, it is claimed that PE investment is made for the sake of seeking shortterm gains by taking control and utilizing the company's resources. Second, a PE firm invests because of prior identification of chances to add value to the company. We attempt to resolve these two conflicting conjectures. We use the Bureau van Dijk's Amadeus database of very large, large and medium-sized European companies. Our major results can be summarized as follows. First, PE firms are less willing to enter the firm if there is already a blocking majority, and they are more likely to leave the firm if control cannot be overtaken. Second, less mature firms are less able to lure a PE firm to invest, thus indicating a safe strategy of PE investors. Third, we do not find empirical evidence that a PE investor comes in to strip a firm of its equity. On the other hand, PE investors are likely to leave the company if it deteriorates in terms of returns and cash. Finally, when comparing the activity of PE and other financial investors, we find essential differences in choosing the field and environment of activity. Terms of use: Documents in

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Economic Consequences of Private Equity Investments on the German Stock Market

Cited by 9 publications

References 64 publications

The impact of M&A transactions from private equity and hedge funds

The impact of M&A transactions from private equity and hedge funds

Abnormal returns and asymmetric information surrounding strategic and financial acquisitions

Are Private Equity Investors Good or Evil?

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