Postacquisition Performance of Acquiring Firms

1992 ◽  
Vol 21 (3) ◽  
pp. 69 ◽  
Author(s):  
Claudio Loderer ◽  
Kenneth Martin
Keyword(s):  
Acquiring Firms ◽  
Postacquisition Performance

CEO Compensation and Acquired and Acquiring Companies in Large Corporate Acquisitions

GIS Business ◽  
2016 ◽  
Vol 11 (5) ◽  
pp. 01-13
Author(s):  
Simon Yang
Keyword(s):  
Firm Performance ◽  
Executive Compensation ◽  
Ceo Compensation ◽  
Relative Sensitivity ◽  
Matched Sample ◽  
Executive Pay ◽  
Corporate Acquisitions ◽  
Acquiring Firms ◽  
Managerial Power ◽  
To Receive

This paper examines the relative sensitivity of CEO compensation of both acquiring and acquired firms in the top 30 U.S. largest corporate acquisitions in each year for the period of 2003 to 2012. We find that total compensation and bonus granted to executive compensation for acquired companies, not acquiring companies, are significantly related to the amount of acquisition deal even after the size and firm performance are controlled for. Both acquiring and acquired CEOs are found to make the significantly higher compensation than the matched sample firms in the same industry and calendar year. We also find that executives with higher managerial power, as measured by a lower salary-based compensation mix, prior to a corporate acquisition are more likely to receive a higher executive pay in the year of acquisition. The association between executive compensation and managerial power seems to be stronger for acquired firms than for acquiring firms in corporate acquisition. Overall, our findings suggest that corporate acquisition has higher impacts on executive compensation for acquired firm CEOs than for acquiring firm CEOs.

scholarly journals Risk and the Market’s Reaction to M&A Announcements

2021 ◽  
Vol 14 (7) ◽  
pp. 334
Author(s):  
Ye Cai ◽  
Hersh Shefrin
Keyword(s):  
Standard Deviation ◽  
Large Firms ◽  
Total Risk ◽  
Basis Point ◽  
Acquiring Firms ◽  
Risk Sensitive ◽  
Point Increase

We estimate how an acquiring firm’s risk changes depending on whether the market initially judges the acquisition to be neutral, strongly negative, or strongly positive for the shareholders of the acquiring firm. We found that for an average neutral acquisition, the annualized standard deviation of an acquiring firm’s total return declines by 5%. In contrast, acquisitions judged negatively by the market result in a 5% increase in total risk, while acquisitions judged positively by the market feature a 30-basis-point increase in total risk. We found the median acquisition to be value creating, not value destructive. Value destruction tends to be concentrated among large firms and to be associated with extreme negative outliers. Acquiring firms with longholder CEOs are more prone to undertake acquisitions and more prone to take on risk, but are less prone to engage in value-destructive acquisitions than acquiring firms with non-longholder CEOs. In this respect, acquiring firms with non-longholder CEOs are more apt to undertake risky bad acquisitions, especially when their prior returns lie above the industry average. In addition, acquiring firms with non-longholder CEOs are less prone to take on good acquisitions that are high in risk. As a general matter, firms with longholder CEOs are less risk sensitive to changes in prior returns than firms with non-longholder CEOs.

scholarly journals Acquisitions, Productivity, and Profitability: Evidence from the Japanese Cotton Spinning Industry

2015 ◽  
Vol 105 (7) ◽  
pp. 2086-2119 ◽  
Author(s):  
Serguey Braguinsky ◽  
Atsushi Ohyama ◽  
Tetsuji Okazaki ◽  
Chad Syverson
Keyword(s):  
Capacity Utilization ◽  
Detailed Data ◽  
Acquiring Firms ◽  
Lower Capacity ◽  
Production Facilities

We explore how changes in ownership affect the productivity and profitability of producers. Using detailed data from the Japanese cotton spinning industry at the turn of the last century, we find that acquired firms' production facilities were not on average less physically productive than the plants of the acquiring firms before acquisition. They were much less profitable, however, due to higher inventory levels and lower capacity utilization—differences that reflected problems in managing the uncertainties of demand. After acquisitions, less profitable acquired plants saw drops in inventories and gains in capacity utilization that raised both their productivity and profitability levels. (JEL D24, G32, G34, L11, L25, L66, N65)

Do Acquiring Firms Manage Earnings?

2009 ◽  
Author(s):  
Raunaq S. Pungaliya ◽  
Anand M. Vijh
Keyword(s):  
Acquiring Firms

Determinants of stock market reaction to cross-border acquisitions: evidence from emerging economies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Samta Jain ◽  
Smita Kashiramka ◽  
P. K. Jain
Keyword(s):  
Emerging Economies ◽  
Value Creation ◽  
Global Economy ◽  
Emerging Market ◽  
Research Work ◽  
Abnormal Returns ◽  
Content Type ◽  
Cross Border ◽  
Country Level ◽  
Acquiring Firms

PurposeThe global economy has witnessed an exponential increase in cross-border acquisitions (CBAs) by emerging market companies (EMCs), demanding a relook at their internationalization strategy. The purpose of the study is to investigate whether the announcement of CBAs by EMCs creates value for the equity-holders of acquiring firms and identify factors affecting the valuation of acquiring companies.Design/methodology/approachThe paper investigates the announcement impact of CBAs of CNX Nifty 500 Indian and SSE 380 Chinese companies. The event study analysis of 553 Indian and 125 Chinese acquisitions supports the contention that CBAs are indeed a strategic choice of EMCs for value creation.FindingsCBAs generate positive and statistically significant abnormal returns for shareholders of both Indian and Chinese acquirers. The markets, however, differ in terms of their motivations; country-level factors have been observed to exert significant influence on the returns of Indian acquirers. Indian companies experience larger value creation on acquiring firms established in developed, institutionally closer and/or economically distant markets. The findings support the asset-seeking motive of Indian companies.Originality/valueThe research work contributes to the evolving stream of CBAs literature with a focus on the globalization strategies of EMCs. The present study is a modest attempt to lay the foundation for a new theoretical framework (asset-seeking perspective) of overseas acquisitions from emerging economies. The existing studies on emerging economies have emphasized, in isolation, either Indian CBAs or international acquisitions by Chinese firms. Being so, the study is unique and original in the sense that it is a comparative study of India and China.

The Effects of Goodwill Tax Deductions on the Market for Corporate Acquisitions

2000 ◽  
Vol 22 (s-1) ◽  
pp. 34-50 ◽  
Author(s):  
Benjamin C. Ayers ◽  
Craig E. Lefanowicz ◽  
John R. Robinson
Keyword(s):  
Firm Characteristics ◽  
Target Firm ◽  
Corporate Acquisitions ◽  
Public Firms ◽  
Acquiring Firms ◽  
Tax Deductions ◽  
Tax Benefits ◽  
The Impact ◽  
Tax Deduction ◽  
Purchased Goodwill

We analyze the effect of the tax deduction for goodwill amortization provided by the Omnibus Budget Reconciliation Act of 1993 (OBRA) on the market for corporate acquisitions. We analyze a sample of taxable corporate acquisitions, including acquisitions of subsidiaries, private firms, and public firms, occurring over the period 1990 through 1996. We assess the impact of the goodwill legislation by (1) quantifying the frequency and size of qualifying acquisitions and comparing these acquisitions to nonqualifying acquisitions pre- and post-OBRA and (2) investigating if and how the goodwill amortization deduction influenced the premium paid for qualifying corporate acquisitions. We estimate a regression of acquisition premiums on target-firm characteristics including a proxy for purchased goodwill. We find that acquisitions qualifying for goodwill amortization comprise less than 17 percent of sample taxable corporate acquisitions before OBRA, and this percentage does not increase after the enactment of OBRA. Nonetheless, our regression results indicate that the OBRA goodwill provisions did contribute to a significant increase in acquisition premiums associated with purchased goodwill for qualifying transactions. Thus, rather than operate as a subsidy to acquiring firms, we find that a majority of the tax benefits associated with the goodwill amortization deduction accrues to target-firm shareholders.

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