scholarly journals Multimarket trading at merger announcement and completion

2011 ◽  
Vol 17 (3) ◽  
pp. 186-197 ◽  
Author(s):  
Rebecca Abraham ◽  
Charles W Harrington Jr ◽  
Albert Williams
Keyword(s):  
Merger Announcement ◽  
Multimarket Trading

The Effect of Acquirer Net Operating Losses on Acquisition Premiums and Acquirer Abnormal Returns

2019 ◽  
Vol 41 (2) ◽  
pp. 103-124
Author(s):  
Merle M. Erickson ◽  
Karen Ton ◽  
Shiing-wu Wang
Keyword(s):  
Stock Price ◽  
Abnormal Returns ◽  
Price Response ◽  
Transaction Prices ◽  
Merger Announcement ◽  
Tax Benefits

ABSTRACT This study examines whether acquirer NOL-related tax benefits generated in an acquisition are shared with the target. For a sample of 1,959 acquisitions, we find that acquisitions of profitable targets by acquirers with NOLs are associated with higher acquisition premiums than acquisitions by non-NOL acquirers. This result indicates that potential post-acquisition tax benefits from use of acquirer NOLs are shared with the target in the form of higher transaction prices. We also find that the acquirer's merger announcement stock price response is positively associated with these tax benefits, which is consistent with the conclusion that acquirers retain part of these potential tax benefits.

Financial institutions mergers: a strategy choice of wealth maximisation and economic value

2020 ◽  
Vol 12 (4) ◽  
pp. 495-529
Author(s):  
Mohamad Hassan ◽  
Evangelos Giouvris
Keyword(s):  
Credit Risk ◽  
Event Study ◽  
Financial Institutions ◽  
Value Creation ◽  
Economic Value ◽  
Abnormal Returns ◽  
Study Analysis ◽  
Event Window ◽  
Content Type ◽  
Merger Announcement

Purpose This study Investigates Shareholders' value adjustment in response to financial institutions (FIs) merger announcements in the immediate event window and in the extended event window. This study also investigates accounting measures performance, comparison of post-merger to pre-merger, including several cash flow measures and not just profitability measures, as the empirical literature review suggests. Finally, the authors examine FIs mergers orientations of diversification and focus create more value for shareholders (in the immediate announcement window and several months afterward) and/or generates better cash flows, profitability and less credit risk. Design/methodology/approach This study examines FIs merger effect on bidders’ shareholder’s value and on their observed performance. This examination deploys three techniques simultaneously: a) an event study analysis, to estimate and calculate abnormal returns (ARs) and cumulative abnormal returns (CARs) in the narrow windows of the merger announcement, b) buy and hold event study analysis, to estimate ARs in the wider window of the event, +50 to +230 days after the merger announcement and c) an observed performance analysis, of financial and capital efficiency measures before and after the merger announcement; return on equity, liquidity, cost to income ratio, capital to total assets ratio, net loans to total loans, credit risk, loans to deposits ratio, other expenses and total assets, economic value addition, weighted average cost of capital and return on invested capital. Deal criteria of value, mega-deals, strategic orientation (as in Ansoff (1980) growth strategies), acquiring bank size and payment method are set as individually as control variables. Findings Results show that FIs mergers destroy share value for the bidding firms pursuing a market penetration strategy. Market development and product development strategies enable shareholders’ value creation in short and long horizons. Diversification strategies do not influence bidding shareholders’ value. Local bank to bank mergers create shareholders’ value and enhance liquidity and economic value in the short run. Bank to bank cross border mergers create value for bidders’ in the long term but are associated with high costs and higher risks. Originality/value A significant advancement over the current literature is in assessing mergers, not only for bank bidders but also for the three pillars FIs of the financial sector; banks, real-estate companies and investment companies mergers. It is an improvement over current finance literature because it deploys two different strategies in the analysis. At a univariate level, shareholder value creation and market reaction to merger announcements are examined over short (−5 or +5 days) and long (+230 days) windows of the event. Followed by regressing, the resultant CARs and BHARs over financial performance variables at the multivariate level.

scholarly journals Volume Dynamics and Multimarket Trading

2013 ◽  
Vol 48 (2) ◽  
pp. 489-518 ◽  
Author(s):  
Michael Halling ◽  
Pamela C. Moulton ◽  
Marios Panayides
Keyword(s):  
Empirical Evidence ◽  
Insider Trading ◽  
Institutional Ownership ◽  
Large Set ◽  
Order Flow ◽  
Listed Firms ◽  
Cross Listing ◽  
Multiple Markets ◽  
Multimarket Trading

AbstractThe trading of shares of the same firm in multiple markets has become common over the last 30 years, but there is little empirical evidence on the extent to which investors actively exploit multimarket environments. We introduce a volume-based measure of multimarket trading to address this question. Analyzing a large set of cross-listed firms, we find higher multimarket trading among markets with similar designs and strong enforcement of insider trading laws and for firms with higher institutional ownership. These findings are important for firms evaluating the benefits of cross listing and for markets competing for order flow.

Stock price movement around the merger announcements: insider trading or market anticipation?

2014 ◽  
Vol 40 (8) ◽  
pp. 821-843 ◽  
Author(s):  
Pawan Jain ◽  
Mark A. Sunderman
Keyword(s):  
Insider Trading ◽  
Stock Price ◽  
Policy Implications ◽  
Securities Market ◽  
Price Movement ◽  
Content Type ◽  
Different Types ◽  
Time Periods ◽  
Merger Announcement ◽  
Merger Announcements

Purpose – The purpose of this paper is to examine the stock price movements for existence of informed trading prior to a merger announcement for the companies listed on the emerging markets of India for the period from 1996 to 2010. Design/methodology/approach – This study applies several event study methodologies and regression analyses to analyze the stock price movement surrounding a merger announcement. The paper divides mergers in two different types: industry merger cases and non-industry merger cases and in two different time periods: recession and boom. Findings – The results show that the information held only by insiders’ works its way into prices. The paper finds strong evidence of insider trading in the case of industry mergers and mergers during recessions. Practical implications – The results from this study have immediate policy implications for India and other developing markets as the paper provides the type of mergers and time periods when merger announcements are more susceptible to insider trading. Originality/value – The paper extends the literature on mergers and insider trading by analyzing firms trading on a developing capital market, which, unlike the developed markets, is characterized by inadequate disclosure and a weaker enforcement of securities regulations. The results support this notion and recommend Indian securities market regulators to tighten the lax regulations. In addition, the author document the divergence in price reaction to the merger announcements for different types of mergers: industry mergers and non-industry mergers, as well as for mergers during different market conditions: recession vs booming capital markets.

The Influences of Financial Statement Recognition and Analyst Coverage on the Market's Valuation of R&D Capital

2007 ◽  
Vol 82 (5) ◽  
pp. 1195-1225 ◽  
Author(s):  
Michael D. Kimbrough
Keyword(s):  
Research And Development ◽  
Private Information ◽  
Information Search ◽  
Fair Value ◽  
Financial Statement ◽  
Analyst Coverage ◽  
Balance Sheets ◽  
Equity Values ◽  
Equity Value ◽  
Merger Announcement

Statement of Financial Accounting Standards No. 141 (SFAS No. 141)'s requirement that an acquirer in a business combination estimate the fair value of the target's separately identifiable assets and liabilities (including research and development capital) provides a rare occasion where estimated fair values of U.S. firms' research and development (R&D) capital based on private information about their R&D activities are publicly disclosed. The degree to which equity values impound the estimated fair values of R&D depends upon the extent to which the private information implicit in the R&D estimates is reflected in investor expectations. Financial statement recognition of R&D capital and analyst activities have been cited as alternative mechanisms by which private information about firms' R&D activities can be revealed to investors. I investigate the degree to which both mechanisms lead to the public revelation of the private information implicit in the R&D fair value estimates by examining whether financial statement recognition of R&D assets by the target prior to the merger announcement and/or analyst coverage of a target prior to the merger announcement influence the degree to which the target's pre-merger announcement equity value reflects the acquirer's subsequently disclosed estimate of the fair value of the target's R&D capital. I find that the degree to which a target's pre-merger announcement equity value reflects the estimated fair value of its R&D capital is increasing in the amount of R&D-related intangibles captured in the target's pre-merger announcement balance sheets and in the number of analysts covering the target prior to the merger announcement. This evidence is consistent with the notion that both financial statement recognition and analysts' private information search activities lead to the revelation of private information about the value of R&D assets that investors incorporate into equity values. I further find that the positive relation between analyst following and the market's valuation of R&D capital is strongest for the portion of the estimated fair value of R&D capital that is unrecognized by the target prior to the merger announcement. This finding is consistent with analysts filling in the information gap left by the lack of financial statement recognition. The results of this study confirm the theorized roles of financial statement recognition and analyst activities in aiding the market's valuation of intangible assets.

The Second Financial Reform and the Development of Financial Industry in Taiwan

2008 ◽  
Vol 11 (01) ◽  
pp. 75-97 ◽  
Author(s):  
Wei-Hsiung Wu
Keyword(s):  
Social Welfare ◽  
Abnormal Returns ◽  
Merger And Acquisition ◽  
Financial Reform ◽  
Sample Period ◽  
Financial Industry ◽  
Cumulative Abnormal Returns ◽  
Cost Efficiencies ◽  
Merger Announcement

All 11 cases of listed banks in Taiwan involved in merger and acquisition during 2000–2006 are examined. In this paper, the cumulative abnormal returns of acquiring banks two days after merger announcement are found to be negative, although target banks' shareholders enjoy higher abnormal returns. For acquiring banks, the post-merger cost efficiencies are not improved. State-owned banks are more efficient and profitable. Operating restrictions on banks and the recession during sample period are the major reasons. It is also suggested that several state-owned banks should be preserved as a means of improving social welfare.

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