Switching due diligence auditor in Chinese mergers and acquisitions

Bi, Xiaogang; Tang, Judy; Tharyan, Rajesh

doi:10.1016/j.ribaf.2020.101244

Cited by 6 publications

(5 citation statements)

References 62 publications

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“…First, this study adopts Price_difference and Price_ratio as alternative variables of green M&A premium. Price_difference represents the transaction value over target book value (Bi et al , 2020). Price_ratio measured by the price paid scaled by the target book value (Bi and Wang, 2018).…”

Section: Resultsmentioning

confidence: 99%

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Symbolic or substantive CSR: effect of green mergers and acquisitions premium on firm value in China

Liu,

Zhou,

et al. 2023

CMS

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Purpose As the cost of completing a transaction, the green merger and acquisition (M&A) premium paid on mergers can influence whether the acquisition creates value or not. However, studies linking M&A premiums to firm value have had mixed results, even fewer studies have examined the effect of green M&A premiums on bidders’ firm value. The purpose of this paper is to investigate whether and how green M&A premiums affect firm value in the context of China’s heavy polluters. Design/methodology/approach Using 323 deals between 2008 and 2019 among China’s heavy polluters, this paper estimates with correlation analysis and multiple regression analysis. Findings Green M&A premiums are negatively associated with firm value. The results are more significant when firms adopt symbolic rather than substantive corporate social responsibility (CSR) strategies. Robustness and endogeneity tests corroborate the findings. The negative relation is stronger when acquiring firms have low governmental subsidy and environmental regulation, when firms have overconfident management, when firms are state-owned and when green M&A occurs locally or among provinces in the same region. This study also analyzes agency cost as an intermediary in the relationship between green M&A premium and firm value, which lends support to the agency-view hypothesis. Originality/value This study provides systemic evidence that green M&A premiums damage firm value through agency cost channel and the choice of CSR strategies from the perspective of acquirers. These findings enrich the literature on both the economic consequences of green M&A premiums and the determinants of firm value and provide a plausible explanation for mixed findings on the relationship between green M&A premiums and firm value.

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Section: Resultsmentioning

confidence: 99%

“…Thus, the main conclusions of the study remain unchanged. (Bi et al, 2020). Price_ratio measured by the price paid scaled by the target book value (Bi and Wang, 2018).…”

Section: Cms 183mentioning

confidence: 99%

Symbolic or substantive CSR: effect of green mergers and acquisitions premium on firm value in China

Liu,

Zhou,

et al. 2023

CMS

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“…Measuring an acquisition's success must be much broader than a simple change in stock price, as stock changes do not entirely reflect synergy effects (Renneboog and Vansteenkiste, 2019). Management and business studies have identified factors such as strategic fit (Cornaggia and Li, 2019;Lee et al, 2018;Olcay et al, 2019), lack of due diligence during the preacquisition stage (Wangerin, 2019;Bi et al, 2020;Kumar and Sengupta, 2020) and challenges during the integration stage (Figueira et al, 2020;Kumar and Sengupta, 2020) as the contributors to M&A synergy creation. Finance and economics literature have identified how managers' characteristics such as chief executive officer's (CEO) traits, compensations, multiple directorships, board composition, political factors, financing sources and CSRrelated policies influence M&A success (Opoku-Mensah et al, 2019;Renneboog and Vansteenkiste, 2019).…”

Section: Literature Review 21 Determinants Of Merger and Acquisition ...mentioning

confidence: 99%

Exploring governments' role in mergers and acquisitions using IVIF MULTIMOORA-COPRAS technique

Opoku‐Mensah

Yin

Asiedu-Ayeh

et al. 2021

IJOEM

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PurposeExisting studies have found that most merger and acquisition (M&A) activities do not create the intended synergy. These studies have mainly investigated how firms' internal factors contribute to M&A successes or failures. The current study differs from the earlier ones by exploring how governments' activities can contribute to the creation of acquisition synergy.Design/methodology/approachA novel technique based on multi-objective optimization by ratio analysis and complex proportional assessment method under an interval-valued intuitionistic fuzzy (IVIF) environment is proposed to prioritize these government roles needed during the M&A process focusing on the Chinese M&A market.FindingsEnactments of regulations and loan guarantees are the most important strategies to help Chinese acquirers overcome acquisition failures. While tax relief ranks third, government training support ranks fourth. Finally, the result shows that government institutional support is the least to help acquirers overcome acquisition failures.Practical implicationsThe government has a role to play in the acquisition success. Although this study has prioritized governments' role in relative importance order, the authors recommend that governments capable of providing all these strategies should do so without any specific order. However, if otherwise, governments should not neglect the strategies with less weight completely but rather consider reducing capital allocations to such strategies. Moreover, this study shows how firms with stronger business ties with government officials may enjoy success during acquisition activities. The authors recommend that firms intending to make acquisitions develop stronger ties with governments in order to benefits from governments.Originality/valueThis is the first study to develop a theoretical framework showing how government can contribute to M&A success. The study achieves this by extending Keynesian's arguments and identifies five (5) ways in which governments can ensure acquisition success. Second, within fuzzy multi-criteria decision-making (F-MCDM) research, this study is the first to show the applicability of integrated multi-objective optimization by ratio analysis (MULTIMOORA) and complex proportional assessment (COPRAS) techniques in an IVIF environment. The novel methodology proposed in this study offers an insightful research method to future studies focusing on group decision problems.

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“…At the same time, when auditors have industry specialization capabilities, they can be promoted to implement adequate audit procedures, thereby improving audit quality [ 15 ]. In M & A transactions, shareholders will largely listen to financial advisers and may support the transaction [ 16 ]; The acquirer will also require replacement because of the low degree of specialization of the auditor [ 17 ]. And hiring expert consultants in the target industry is the most powerful way to obtain more superior information about the target company, thereby reducing the risk of overestimating the target value when improving M & A consulting services, formulating M & A plans, and determining transaction pricing [ 18 ].…”

Section: Introductionmentioning

confidence: 99%

The effect of auditor’s cooperation with independent financial advisors on the reliability of performance commitment—Based on the moderating effect of managerial overconfidence

Lin,

Wang,

Zheng

et al. 2023

PLoS ONE

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Based on the sample of major asset restructuring transactions of Shanghai and Shenzhen A-share listed companies from 2009 to 2018, this paper uses Logit model to examine the impact of auditors ’ cooperation experience with independent financial advisors on the reliability of performance commitments, and to examine the moderating effect of management overconfidence on the relationship between the two. The results show that the cooperation experience between auditors and independent financial advisors is significantly positively correlated with the reliability of performance commitment, and the closer the cooperation experience is, the easier the performance commitment will be realized, this has played a financial intermediary team effect. Further analysis shows that in the context of management overconfidence, the positive relationship between financial intermediaries ’ cooperation experience and the reliability of performance commitment is stronger. The research results enrich the research on the influencing factors of M & A performance commitment and the economic consequences of financial intermediaries ’ cooperation, and help the transaction subjects to rationally view performance commitment and regulators to improve policies and regulations.

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Switching due diligence auditor in Chinese mergers and acquisitions

Cited by 6 publications

References 62 publications

Symbolic or substantive CSR: effect of green mergers and acquisitions premium on firm value in China

Symbolic or substantive CSR: effect of green mergers and acquisitions premium on firm value in China

Exploring governments' role in mergers and acquisitions using IVIF MULTIMOORA-COPRAS technique

The effect of auditor’s cooperation with independent financial advisors on the reliability of performance commitment—Based on the moderating effect of managerial overconfidence

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