The postmerger share-price performance of acquiring firms

Franks, Julian R.; Harris, Robert S.; Titman, Sheridan

doi:10.1016/0304-405x(91)90014-b

Cited by 354 publications

(243 citation statements)

References 17 publications

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“…As for the methods of payment, we find that when acquisitions are paid in full either with cash or stock the effect is negative on the gains made by targets, but positive on bidders returns, in line with Huang and Walkling (1987) and Franks, Harris, and Titman (1991).…”

Section: Multivariate Analysismentioning

confidence: 78%

Corporate acquisitions and financial constraints

Khatami

Marchica

Mura

2015

International Review of Financial Analysis

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Using a large sample of US acquisitions made between 1985 and 2013, we study the effect of financial constraints on acquisition gains and acquisition likelihood. Our findings show that financial constraints of target companies significantly increase acquisition premiums and abnormal returns for both parties. Our results further show that the presence of financial constraints in the target is one of the most important determinants of a takeover bid. This supports the idea that acquisitions may improve the ability of financially constrained companies to access capital through a better reallocation of resources within segments of the same company (e.g., internal capital market) or through better access to external markets. This would eventually benefit bidders too, as new capital would be invested in valuable growth opportunities that otherwise would expire unexercised.JEL Classification: G32, G34

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Section: Multivariate Analysismentioning

confidence: 78%

Corporate acquisitions and financial constraints

Khatami

Marchica

Mura

2015

International Review of Financial Analysis

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“…Franks, Harris, and Titman [1991] find no underperformance, but Loughran and Vijh [1997] and Mitchell and Stafford [2000] find that negative longer-run returns are most pronounced for stock-financed acquisitions. 4 Our results indicate that built and acquired investments have very similar implications for long-run stock performance.…”

Section: Literature Reviewmentioning

confidence: 99%

Major Investments, Firm Financing Decisions, and Long-Run Performance

2006

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“…Using the CAPM, a number of authors have shown that acquirers underperform the market for up to three years following the acquisition (Jensen and Ruback (1983) review some of this evidence). Franks, Hams and Titman (1991) show that these results are sensitive to how the risk-adjustment is made; for their sample period, the abnormal returns disappear if a multi-factor model is used. Agrawal, Jaffee and Maridelker (1992) show that the negative abnormal returns hold with a multifactor model except for mergers at the end of the 1970s, '° See Schwert (1983) for a review of this evidence.…”

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confidence: 95%