scholarly journals WHAT DRIVES MERGERS & ACQUISITIONS WAVES OF LISTED COMPANIES OF THE CHINEXT MARKET? IPO OVER-FINANCING OR STOCK OVERVALUATION

2018 ◽  
Vol 24 (4) ◽  
pp. 1499-1532 ◽  
Author(s):  
Xin Xu ◽  
Yong-jin Liang ◽  
Shun-lin Song
Keyword(s):  
Mergers And Acquisitions ◽  
Market Reaction ◽  
Abnormal Returns ◽  
Market Value ◽  
The United States ◽  
Payment Method ◽  
Cumulative Abnormal Returns ◽  
Cash Payment ◽  
The Government ◽  
Corporate Mergers And Acquisitions

A wave of mergers and acquisitions (M&A) has been consistently rising among the China’s ChiNext companies over the past years, which has drawn great attention across academia and industry. Based on the neoclassical theory and the behavioral theory, this paper explores the driving factors of M&A among Chinese ChiNext companies. Two hypotheses were put forward: one based on IPO over-financing and the other based on the market value overvaluation. IPO over-financing is specific to the Chinese capital market while market value overestimation is driven by the continuous upsurge in the ChiNext Market. Our study found that both factors account for enterprises’ mergers and acquisitions. They have far-reaching influences on such fields as acquisition probability, the size of the transaction, transaction frequency, M&A payment method and market reaction. Due to IPO over-financing, enterprises tend to carry out M&A via cash payment or cash and stock mixed payment method. Heavier IPO over-financing will increase the chance of M&A and leads to larger transaction size and higher transaction frequency. Market value overvaluation will lead to more uses of stock or cash and stock mixed payment on M&A transactions. When the company’s stock is overvalued, the company will use the overvalued equity to acquire other companies. Greater overvaluation of the market value also increases the chance of M&A and leads to a larger transaction size and higher frequency of M&A. In China, IPO over-financing rather than market value over-valuation, is the major driving factor for China’s corporate mergers and acquisitions. Further study found that the market reaction to different payment methods in mergers and acquisitions varies: it has the minimum reaction on cash payment, a larger reaction on stock payment and the greatest reaction on mixed payment. Also, the mixed payment method has the largest cumulative abnormal returns. This is different from the empirical findings in the United States and Europe. This paper provides a theoretical basis and empirical evidence for an in-depth understanding of the wave of mergers and acquisitions of Chinese ChiNext companies, and provides a basis for decision-making and policy recommendations for the government regulators and investors.

scholarly journals Acquisitions of Financially Constrained Targets

2019 ◽  
pp. 1-10
Author(s):  
Maslinawati Mohamad ◽  
Surendranath Rakesh Jory ◽  
Nnamdi Madichie
Keyword(s):  
United States ◽  
Mergers And Acquisitions ◽  
Stock Returns ◽  
Abnormal Returns ◽  
The United States ◽  
Target Firm ◽  
Wealth Transfer ◽  
Stock Market Reaction ◽  
Cumulative Abnormal Returns ◽  
Acquisition Announcements

We examine the extent to which bidders’ stock returns at acquisition announcements reflect the financing needs of the target firm. Using a sample of the United States mergers and acquisitions of a period starts in 1985 and ends in 2012, we find that bidders of financially constrained targets pay lower acquisition premiums and earn higher announcement period cumulative abnormal returns than bidders of unconstrained targets. The lower premium and positive stock market reaction are both sources of value for bidders’ shareholders. Our results contrast the findings of the literature that document an insignificant wealth transfer to bidder shareholders.

scholarly journals The Long-Run Performance of U.S. Bidding Firms in the Post M&A Period: The Impact of Bid Type, Payment Method and Industry Specialisation

2017 ◽  
Vol 12 (2) ◽  
pp. 230 ◽  
Author(s):  
George Giannopoulos ◽  
Andrew Holt ◽  
Ehsan Khansalar ◽  
Patrick Mogoya
Keyword(s):  
Mergers And Acquisitions ◽  
Financial Services ◽  
Abnormal Returns ◽  
The United States ◽  
Industrial Sector ◽  
Payment Method ◽  
Public Firms ◽  
Services Sector ◽  
Long Run ◽  
The Impact

This study investigates how mergers and acquisitions (M&A) affect the wealth of shareholders of public firms in the United States (U.S). More specifically, it investigates whether the nature of the bid, the payment method used, and the type of M&A have implications for shareholders of U.S bidding firms. The study analyses 352 mergers and acquisitions in the U.S during the period 1999-2008, and its results indicate that bidding firms suffer significant negative buy-and-hold abnormal returns in the three years period after a M&A announcement. The results also suggest that, in the long-run, hostile bids and cash-financed bidders outperform friendly bids and stock-funded bidders, respectively. Furthermore, the study also finds that in the long-run bidder firms that focus on industry specialisation within their M&A targets significantly outperform firms that adopt a more diversified strategy. The analysis also investigates the effects of M&A specialisation/diversification in six different sectors, and finds that specialised bidders outperform diversified bidders in four sectors: consumer & basic materials, energy & utilities, communications and technology. Furthermore, bidder firms in the financial services sector perform significantly better when diversifying into other sectors, while the performance of bidder firms in the industrial sector appears unaffected by the degree of M&A specialisation or diversification.

scholarly journals Acquisitions of Financially Constrained Targets.

2018 ◽  
pp. 868-877
Author(s):  
Maslinawati Mohamad ◽  
Surendranath Rakesh Jory ◽  
Nnamdi Madichie
Keyword(s):  
United States ◽  
Mergers And Acquisitions ◽  
Stock Returns ◽  
Abnormal Returns ◽  
The United States ◽  
Target Firm ◽  
Wealth Transfer ◽  
Stock Market Reaction ◽  
Cumulative Abnormal Returns ◽  
Acquisition Announcements

We examine the extent to which bidders’ stock returns at acquisition announcements reflect the financing needs of the target firm. Using a sample of the United States mergers and acquisitions of a period starts in 1985 and ends in 2012, we find that bidders of financially constrained targets pay lower acquisition premiums and earn higher announcement period cumulative abnormal returns than bidders of unconstrained targets. The lower premium and positive stock market reaction are both sources of value for bidders’ shareholders. Our results contrast the findings of the literature that document an insignificant wealth transfer to bidder shareholders.

Divestiture and Its Market Reaction in a Consolidating Industry: The Global Brewing Industry

2021 ◽  
pp. 1-21
Author(s):  
Ludwig Erl ◽  
Florian Kiesel
Keyword(s):  
Mergers And Acquisitions ◽  
Capital Market ◽  
Market Reaction ◽  
Market Performance ◽  
Abnormal Returns ◽  
Brewing Industry ◽  
Efficiency Gains ◽  
Market Values ◽  
Jel Classifications ◽  
The Capital Market

Abstract This study provides a perspective on the market performance of divestitures in the global brewing industry. In 2018, the five largest players accounted for 60% of the global beer volume. We analyze to what extent the capital market values divestitures in an industry where players usually seek efficiency gains and growth through mergers and acquisitions. Based on a sample of 61 divestiture intent announcements in the period from 1999–2018, this study shows that publicly listed brewing groups experience significant positive abnormal returns of about 1.4%. We measure the influential effect of success determinants concerning the underlying industry, the divested business, the divestiture structure, and the divestor itself. (JEL Classifications: G14, G34, L25, Q14)

scholarly journals Analysis of the effectiveness of healthcare M&A transactions in developed countries

2020 ◽  
pp. 21-21
Author(s):  
Varvara Nazarova
Keyword(s):  
Abnormal Returns ◽  
Developed Countries ◽  
The United States ◽  
Healthcare Industry ◽  
The European Union ◽  
Payment Method ◽  
Corporate World ◽  
The Face ◽  
Thesis Statement ◽  
Additional Value

The healthcare industry is a large and fast-growing segment of the corporate world, especially in developed countries. In the face of growing competition, healthcare companies inevitably resort to mergers and acquisitions (M&As) in order to accelerate their development. The objective of this study is to identify the creation of additional value for M&A deal participants in the healthcare industry in the United States and the European Union in 2008-2017. In this paper, we propose the following thesis statement: can healthcare companies expect excess returns from M&A deals? On average, M&A deals in the healthcare industry in developed countries create positive abnormal returns for acquiring companies and are efficient; a positive, significant impact on abnormal returns was found in the deal value of M&A deals, a negative significant impact was observed for deals conducted with the shares payment method and for acquiring companies with a larger number of employees.

scholarly journals TRADEMARK ACTIVITY AND THE MARKET PERFORMANCE OF U.S. COMMERCIAL BANKS

2012 ◽  
Vol 13 (5) ◽  
pp. 931-950 ◽  
Author(s):  
Carlos González-Pedraz ◽  
Sergio Mayordomo
Keyword(s):  
Commercial Banks ◽  
Negative Impact ◽  
Abnormal Returns ◽  
Market Value ◽  
Tobin’S Q ◽  
Tobin's Q ◽  
Cumulative Abnormal Returns ◽  
And Performance ◽  
Positive Effect

This empirical paper analyzes the effect of trademark activity on the market value and performance of US commercial banks from two perspectives. First, a longterm perspective considers the effect of such activity on banks’ Tobin's q. Second, with a short-term perspective, the authors analyze the effect of trademark activity on banks’ abnormal returns. An older portfolio of trademarks diminishes the ratio of market value to firm assets, but this ratio can be improved in the long term by abandoning old trade-marks. Portfolios of trademarks with wide diversification do not help increase Tobin's q. Furthermore, according to an event study, the creation of a trademark has a positive effect on cumulative abnormal returns compared with no event, whereas a cancellation event has a negative impact.

Bank Dependence and Bank Financing in Corporate M&A

2021 ◽  
Author(s):  
Sheng Huang ◽  
Ruichang Lu ◽  
Anand Srinivasan
Keyword(s):  
Mergers And Acquisitions ◽  
Abnormal Returns ◽  
Loan Pricing ◽  
Loan Contracts ◽  
Cumulative Abnormal Returns ◽  
Bank Financing ◽  
The Difference

We examine the valuation impact of bank-financed mergers and acquisitions (M&As) and the loan contracts used to finance M&A transactions, focusing on the difference between bank-dependent acquirers and other acquirers. We find that bank-financed deals have higher acquirer’s cumulative abnormal returns relative to other cash M&A deals, but this certification effect exists only for bank-dependent acquirers. Despite bank-dependent acquirers being more susceptible to hold-up, banks do not impose higher loan pricing or more stringent nonprice terms on them. After completion of the acquisition, bank-dependent acquirers retain the M&A financing banks for a much larger share of their borrowing needs, suggesting the importance of repeat business for lack of hold-up. Our findings highlight the positive aspects of bank dependence and the importance of implicit contracting for the lack of hold-up in lending markets. This paper was accepted by David Simchi-Levi, finance.

scholarly journals PENGUJIAN REAKSI PASAR TERHADAP PERISTIWA MERGER DAN AKUISISI DI BURSA EFEK INDONESIA (BEI)

2017 ◽  
pp. 3325
Author(s):  
Rintohan Malau ◽  
Luh Putu Wiagustini ◽  
Luh Gede Sri Artini
Keyword(s):  
Linear Regression ◽  
Mergers And Acquisitions ◽  
Multiple Linear Regression ◽  
Market Reaction ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Market Model ◽  
Expected Returns ◽  
Sample Material ◽  
A Company

This study aimed to see whether there abnormal returns around the period of mergers and acquisitions, using a market model and the expected returns of 100 days, as well as using the event period is seven days before and seven days after the announcement of mergers and acquisitions. The sample was a company for mergers and acquisitions in Indonesia Stock Exchange during the years 2013-2015, sampling in this study did not consider the corporate Action others besides mergers and acquisitions alone, so it acquired 30 companies as the sample material, the analysis tools used in this research is multiple linear regression with Level of Singnificance by 5%. The results showed that there were no abnormal returns around the period of the study, so it can be said that there is no market reaction around the announcement of mergers and acquisitions as evidenced by a greater significance than 0.05%. Most likely this is because there is no leakage of information during the period of the study.

Connecting Environmental Law and Corporate Transactions to Each Other: Transaction Triggered Environmental Acts

2010 ◽  
Vol 7 (4) ◽  
pp. 437-450
Author(s):  
Rik Mellenbergh
Keyword(s):  
United States ◽  
Mergers And Acquisitions ◽  
Environmental Law ◽  
Environmental Issues ◽  
The United States ◽  
Negative Effects ◽  
Corporate Mergers ◽  
Corporate Mergers And Acquisitions

AbstractEnvironmental issues, such as site contamination and compliance with environmental permits and rules, are often of importance with respect to corporate mergers and acquisitions or transfers of sites. This paper focuses on specific environmental acts applicable in some states in the United States and in the region of Flanders (Belgium), the so called transaction (or transfer) triggered environmental acts. These acts are applicable—'triggered'—if a transaction or transfer as defined in the transaction triggered environmental act occurs. The applicability of these acts is thus linked to a transaction or transfer as defined in the transaction triggered environmental act. In this paper these transaction triggered environmental acts will be analyzed, and both possible positive and negative effects linked to the introduction of such an act will be discussed with respect to the transaction triggered environmental acts currently applicable in certain states in the United States and in the region of Flanders (Belgium).

scholarly journals Pokémon Go!: Stock valuation and disruptive innovation in entertainment industry

2021 ◽  
Vol 18 (46) ◽  
pp. 47-63
Author(s):  
Claudio Marcelo Edwards Barros ◽  
Iago França Lopes ◽  
Itzhak David Simão Kaveski
Keyword(s):  
United States ◽  
Abnormal Returns ◽  
The United States ◽  
Disruptive Innovation ◽  
Stock Valuation ◽  
Stock Market Reaction ◽  
Cumulative Abnormal Returns ◽  
Thomson Reuters ◽  
Pokémon Go ◽  
The Impact

This research aims to analyze the impact of the announcement of the launch of the game Pokémon Go! on Nintendo's stocks. The study anchors itself on conceptual foundations of disruptive innovation and previous research that examined the stock market reaction to the announcement of innovations. This is an empirical research whose sample is made up of 4 Nintendo company assets traded in the United States, Germany, Switzerland and Japan, as well as the assets of companies comparable to Nintendo that made up the Detailed Stock Report available in the Refiniv® system (Thomson Reuters), at the time of the launch of the game. Through conducting a series of event studies, Nintendo's stocks traded in the United States, Germany, Switzerland and Japan presented abnormal returns after one day of the game's launch. These findings proved to be specific of Nintendo corporation's assets, with no similar reactions observed in peer valuation analysis. Based on five variables of cumulative abnormal returns (CARs) for all entertainment companies listed in Japan and controlled by factors such as profitability, debt, size and market value, it was found that on average the cumulative abnormal returns of Nintendo were significantly higher than the other companies in all 5 models tested. In response, we hope to broaden the discussions listed in this survey to recognize the launch of Pokémon Go! as an innovation with typical traits of Disruptive innovation, which were not ignored by capital market when the game was launched in July 06th, 2016.

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