Revisiting acquirer returns: Evidence from unanticipated deals

Tunyi, Abongeh A.

doi:10.1016/j.jcorpfin.2020.101789

Cited by 43 publications

(30 citation statements)

References 87 publications

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“…We find evidence that rival firm CARs are positively and significantly correlated with receiving a takeover bid within the following year, corroborating the acquisition probability hypothesis. We also discover that rival firm CARs are positively and significantly correlated with initiating a takeover announcement within the following year, supporting the contention that announcement period returns underestimate the wealth effect of bidding (Cai et al., 2011; Cornett et al., 2011; Tunyi, 2021). This is a critical finding.…”

Section: Resultssupporting

confidence: 72%

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The impact of takeover anticipation on rival firms

Davis

Sha

et al. 2021

Business Fin & Account

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This paper utilizes a large, hand‐collected dataset to observe for the first time the initial wealth impact of an anticipated takeover bid on the target's rival. Distinguishing among predominant theories of acquisition probability, collusion, competitive advantage, hubris and industry growth, we find substantial evidence to support the premise that gains to rivals around the target firm's rumor date are associated with becoming either a target or a bidding firm within 1 year. Additionally, factors at the time of bid anticipation serve as useful predictors when assessing which rivals will receive or initiate a bid for corporate control. Our results demonstrate that takeover rumors represent an early and important mechanism by which information is transferred throughout an industry.

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Section: Resultssupporting

confidence: 72%

“…RivalFirmCAR and RumoredFirmCAR refer to the CARs over the (−1, +1) rumor date period for the rival or rumored firm, respectively. Firm-level controls refer to independent variables we found to be insignificant and thus omitted for brevity: Tunyi, 2021). This is a critical finding.…”

Section: Logistical Analysis Of Rival Firmsmentioning

confidence: 94%

The impact of takeover anticipation on rival firms

Davis

Sha

et al. 2021

Business Fin & Account

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“…Our review of the takeover prediction literature focuses on the prediction of targets. It is worth noting that a few studies have attempted to develop models to predict acquirers (Cornett et al , 2011; Tunyi, 2020). There are, therefore, opportunities to develop integrated frameworks for matching acquirers and targets.…”

Section: Discussionmentioning

confidence: 99%

Fifty years of research on takeover target prediction: a historical perspective

Tunyi

2021

QRFM

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Purpose This paper aims to review prior studies and presents a synthesis of the takeover prediction literature spanning the period 1968–2018. Design/methodology/approach The paper adopts a narrative review approach. It explores prior studies on takeover target prediction from a historical perspective, focusing on the evolution and development of the literature over the 50-year period. Findings From a historical development perspective, prior studies in the area can be partitioned into four distinct eras. Studies in the first era (1968–1985) mainly established that takeover targets share common characteristics which can be captured with financial ratios. Studies in the second era (1986–2002) developed and extended formal target prediction hypotheses. These studies concluded that it was impossible to build a successful investment strategy around takeover target prediction. Studies in the third era (2003–2009) explored similar questions using alternative modelling techniques but arrive at similar results – targets can be predicted with limited accuracy and target prediction is unlikely to lead to abnormal returns. Studies in the fourth era (2010–2018) explore implications of M&A predictability on share valuation, governance and bond prices (amongst others), but most importantly, provide some evidence that takeover prediction can lead to abnormal returns when combined with appropriate screening strategies. Originality/value This presents the first in-depth review of the literature on takeover target prediction. It highlights the development of the literature over four distinct eras and identifies several limitations, research gaps and opportunities for future research. Given the recent decline in the literature (i.e. fourth era), this study may stimulate new research in the area.

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“…We follow prior research (Brooks et al, 2018;Tunyi, 2021;Du and Gerety, 2018) and estimate acquirer performance (CAR) using an event study approach and the market model. Our estimation window consists of 280 days (ending 41 days before the deal announcement date).…”

Section: Methodsmentioning

confidence: 99%

“…Acquirers systematically underperform when merger and acquisitions (M&As) are announced with their performance shaped by the deal, governance and managerial characteristics, amongst other factors (Alexandridis et al, 2017;Tunyi, 2021;Renneboog and Vansteenkiste, 2019;Tuch and O'Sullivan, 2007). Prior studies attribute much of the underperformance to acquiring managers' over-optimism, hubris and overconfidence, which results in over-payment for their targets (see Renneboog and Vansteenkiste, 2019, for a review).…”

Section: Introductionmentioning

confidence: 99%