The gains to bidding firms from merger

Asquith, Paul; Bruner, Robert F.; Mullins, David

doi:10.1016/0304-405x(83)90007-7

Cited by 827 publications

(450 citation statements)

References 8 publications

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“…This view is in line with Asquith et al (1983), Jensen and Ruback (1983), Travlos (1987) , Servaes (1991) and Fuller et al (2002) who show that announcement returns increase with the target's size relative to the bidder.…”

Section: The Long-run Bhar Regression Resultssupporting

confidence: 81%

Merger momentum and market valuations: the UK evidence

Antoniou

Guo

Petmezas

2008

Applied Financial Economics

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This study examines the effect of merger momentum on acquirer's returns both in the shortand long-run. The focus is on high-valuation markets and the source of momentum is investigated employing three different hypotheses: the neoclassical hypothesis, the hubris hypothesis and the investor sentiment theory. The neoclassical theory predicts increase in value with no long term reversals and hubris hypothesis suggests destruction of value in both short and long-run due to managerial overconfidence. However, our results support the investor sentiment (optimism) hypothesis since investors are found to earn significant gains in the shortrun but returns are reversed in the long-run as initial expectations may not be fully met when combined firms' accomplishments become known over time. The results are robust after controlling for several acquirer and deal characteristics. JEL Classification: G14; G34.

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Section: The Long-run Bhar Regression Resultssupporting

confidence: 81%

Merger momentum and market valuations: the UK evidence

Antoniou

Guo

Petmezas

2008

Applied Financial Economics

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“…In studies which specifically address prior stock performance of targets in mergers, the evidence for the efficient management hypothesis is not compelling, as only one study finds significantly negative abnormal return (Asquith et al 1983) whereas seven others do not (Agrawal and Jaffe 2003;Agrawal and Walkling 1994;Asquith and Kim 1982;Ellert 1976;Langetieg 1978;Malatesta 1983;Mandelker 1974). It might be expected that hostile takeovers-often tender offers-rather than friendly mergers are triggered by poor performance, but in five studies (Dodd and Ruback 1977;Franks and Mayer 1996;Kini et al 2004;Martin and McConnell 1991;Smiley 1976) on target performance in tender offers, only Smiley finds that targets exhibit significantly negative pre-acquisition performance.…”

Section: Pre-acquisition Performance Of Targetsmentioning

confidence: 98%

“…Hitherto, several perspectives on wealth effects following takeovers have been studied in finance literature, thereby addressing specific issues such as method of payment (Franks et al 1988;Travlos 1987), identity of target (Chang 1998), methodology (Asquith et al 1983), firm size (Moeller et al 2004), and the impact of sector-specific characteristics (Allen and Sirmans 1987;Subrahmanyam and Rangan 1997).…”

Section: Shareholder Wealth Effects Following Takeoversmentioning

confidence: 99%

How Does the Market for Corporate Control Function for Property Companies?

Eichholtz

Kok

2007

J Real Estate Finan Econ

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We investigate 95 takeovers of property companies all over the world and find that only two of those are hostile. To determine the effectiveness of the market for corporate control, we first study characteristics of targets and acquirers compared to a control sample, using the complete global universe of listed property companies during the most recent takeover wave (1999)(2000)(2001)(2002)(2003)(2004). We find that the inefficient management hypothesis holds for both REITs and non-REITs, as targets exhibit significant underperformance before takeovers. In the second part of this study, we investigate shareholder wealth effects following takeovers and confirm previous findings that abnormal returns for targets and bidders are distinctly different for the real estate sector. Moreover, we show that this difference not only holds for REIT-to-REIT mergers, but also for mergers of real estate firms without a REIT-status.

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“…Asquith et al, 1983;Bradley et al, 1988;Cai and Sevilir, 2012;Agrawal et al, 2013;Goodman et al, 2014;Cai et al, 2016) we use acquisition announcement returns as our main measure of M&A quality and expect common auditors to be associated with higher acquisition announcement returns. Subsequently, we test whether other proxies used in prior literature to capture M&A quality, give us similar results.…”

Section: Introductionmentioning

confidence: 99%

Common auditors and cross-country M&A transactions

Chircop

Johan

Tarsalewska

2018

Journal of International Financial Markets, Institutions and Mo

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Using a comprehensive sample of cross-country mergers and acquisitions for the period 2000 to 2014 we examine the effect of common auditors on the efficiency of cross-country M&A transactions. We predict that the use of common auditors reduces uncertainty, resulting in higher M&A efficiency. We find that this common-auditor effect results in a positive market reaction to the M&A announcement, lower premium and greater increase in return on assets following the M&A transaction. Further, we find that these effects are more pronounced the greater the M&A transaction uncertainty and when the accounting standards of the transacting parties differ.

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The gains to bidding firms from merger

Cited by 827 publications

References 8 publications

Merger momentum and market valuations: the UK evidence

Merger momentum and market valuations: the UK evidence

How Does the Market for Corporate Control Function for Property Companies?

Common auditors and cross-country M&A transactions

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