The effects of anticipated future investments on firm value: evidence from mergers and acquisitions

Zhang, Ning

doi:10.1007/s11142-016-9353-3

Cited by 8 publications

(8 citation statements)

References 49 publications

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“…Prior research (Danbolt et al, 2016;Gort, 1969;Palepu, 1986;Tunyi et al, 2019) suggests that mergers within an industry (disturbance) incentivises other firms to engage in acquisitions to retain their competitive position or market share. Due to significant resource requirements when dealing with acquisitions and post-acquisition integration, comparatively larger firms (firm size) with significant cash resources (free cash flow) are more likely to engage in acquisitions (Zhang, 2016). Notwithstanding, antitrust regulation can prevent the largest firms (firm size squared) from engaging in further acquisitions (Tunyi, 2019).…”

Section: Estimating Bid Likelihoodmentioning

confidence: 99%

Revisiting acquirer returns: Evidence from unanticipated deals

Tunyi

2021

Journal of Corporate Finance

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Section: Estimating Bid Likelihoodmentioning

confidence: 99%

Revisiting acquirer returns: Evidence from unanticipated deals

Tunyi

2021

Journal of Corporate Finance

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“…We follow Richardson (2006) and Zhang (2016) to derive accounting proxies for new investments, overinvestment and free cash flows. Specifically, free cash flow is computed as cash flow above that required to service existing debt obligations, maintain assets in place and finance expected new investments (Zhang, 2016). Free cash flow is estimated as follows:…”

Section: Empirical Tests Of Hypothesesmentioning

confidence: 99%

From performance to horizon: managements’ horizon and firms’ investment efficiency

Tunyi,

Areneke,

Hussain

et al. 2024

RAF

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Purpose This study proposes a novel measure for management’s horizon (short-termism or myopia vs long-termism or hyperopia) derived from easily obtainable firm-level accounting and stock market performance data. The authors use the measure to explore the impact of managements’ horizon on firms’ investment efficiency. Design/methodology/approach The authors rely on two commonly used but uncorrelated measures of management performance: accounting performance (return on capital employed, ROCE) and stock market performance (average abnormal return, AAR). The authors combine these measures to develop a multidimensional framework for performance, which classifies firms into four groups: efficient (high accounting and high market performance), poor (low accounting and low market performance), myopic (high accounting and low market performance) and hyperopic (low accounting and high market performance). The authors validate this framework and deploy it to explore the relationship between horizon and firms’ investment efficiency. Findings In validation tests, the authors show that management myopia (hyperopia) explains firms’ decision to cut (grow) research and development investments. Further, as expected, myopic (hyperopic) firms are associated with significantly more (less) accrual and real earnings management. The empirical tests on the link between horizon and investment efficiency suggest that myopic managers cut new investments while their hyperopic counterparts grow the same. Ultimately, the authors find that myopia (hyperopia) exacerbates(mitigates) the over-investment of free cash flow problem. Originality/value The authors introduce a framework for assessing management’s horizon using easily obtainable measures of performance. The framework explains inconsistencies in prior empirical research using different measures of performance (accounting versus market). The authors demonstrate its utility by showing that the measure explains decisions around research and development investment, earnings management and firm investments.

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“…Free cash flow method contains information that may objectively and comprehensively reflect the ability of enterprises to generate the value, but also help companies clearly understand their market value. The market appraisal depends on the profit rate from previous periods and corporations' current free cash flow [9]. The company value should thereby be of vital interest to future investors and managers.…”

Section: Literature Researchmentioning

confidence: 99%

The applicability of FCFF method evaluating an enterprise of Real Estate segment

Vrbka

Vitková

2021

SHS Web Conf.

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The article aims at evaluating a specific enterprise of the Real Estate segment using FCFF (Free Cash Flow to Firm) method. This technique determines the company’s value through free cash flows. Enterprise valuation presents a distinct discipline requiring appraiser’s deep understanding not only of the evaluated enterprise but also other external decisive influences. The theoretical part focuses on calculation procedures using The CAPM (Capital Asset Pricing Model) model quantifying separate variables that determine discount rates. The suggested technique deals with specific financial data of the company and is applicable in evaluating small and medium-sized enterprises.

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The effects of anticipated future investments on firm value: evidence from mergers and acquisitions

Abstract: DedicationThis dissertation is dedicated to my parents Weiying

Cited by 8 publications

References 49 publications

Revisiting acquirer returns: Evidence from unanticipated deals

Revisiting acquirer returns: Evidence from unanticipated deals

From performance to horizon: managements’ horizon and firms’ investment efficiency

The applicability of FCFF method evaluating an enterprise of Real Estate segment

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