Acquisitions and the cost of debt: Evidence from China

Wang, Kun Tracy; Wu, Youshen; Sun, Aonan

doi:10.1016/j.irfa.2021.101925

Cited by 11 publications

(12 citation statements)

References 99 publications

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“…This distribution is comparable to that reported inHuang et al (2018). Our final sample is substantially reduced because our research focuses on the cost of bond financing and thus requires that firms in our sample have issued public debt.9 For example,Wang et al (2021a) show that the mean yield spread and percentage of Chinese firms controlled by private shareholders are 2.411% and 49.7%, respectively, during the period 2007-2020. The mean yield spread reported byGao et al (2020) for Chinese firms during the period 2009-2017 was 2.415% (calculated based on the average yield spreads of 2.76% for family firms and 2.07% for nonfamily firms reported in their Table2).…”

supporting

confidence: 60%

“…The average yield spread is 2.678%, and 47.5% of the sample firms are controlled by private shareholders. These statistics are comparable to those reported by recent studies of the Chinese bond market (e.g., Gao et al ., 2020; Wang et al ., 2021a). 9 Panel B of Table 1 presents descriptive statistics for the subsamples of voluntary forecasters (Column 1), mandatory forecasters (Column 2), and nonforecasters (Column 3).…”

Section: Research Design and Datamentioning

confidence: 99%

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Conditional Mandates on Management Earnings Forecasts: The Impact on the Cost of Debt

Wang

Zhu

2023

Abacus

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Exploiting a unique conditional disclosure mandate on management earnings forecasts (MEFs) in China, we examine the differential effects of voluntary and mandatory MEFs on the cost of debt. We find that firms providing voluntary MEFs have lower cost of debt than do mandatory forecasters and nonforecasters. The results of the channel analyses reveal that voluntary forecasters have greater commitment to voluntary MEFs in future periods than do mandatory forecasters and nonforecasters, and the precision, accuracy, and timeliness of MEFs are higher for voluntary forecasters than for mandatory forecasters. Additional analyses show that the differential effects of voluntary and mandatory MEFs on cost of debt are stronger for voluntary forecasters operating in opaque information environments, issuing high‐quality and confirming forecasts, controlled by private shareholders, and operating in highly competitive product markets. Overall, our results indicate that, compared with mandatory MEFs, voluntary MEFs are more informative for credit investors, particularly for firms facing greater information risk and operating uncertainty.

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confidence: 60%

Section: Research Design and Datamentioning

confidence: 99%

Conditional Mandates on Management Earnings Forecasts: The Impact on the Cost of Debt

Wang

Zhu

2023

Abacus

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“…We control for government control ( GVT ) and expect its coefficient to be negative because Wang and Shailer's (2018) meta-analysis shows that, compared with private ownership, government ownership is associated with inferior performance. GVT is a dummy variable that equals 1 if a firm is ultimately controlled by either the central or a local government, and 0 otherwise (Wang, Wu, & Sun, 2021; Zhu, Wang, & Wilson, 2021). We include ROA and earnings-to-price ratio ( ETP ) to control for accounting performance.…”

Section: Data and Research Designmentioning

confidence: 99%

Does the market reward meeting or beating analyst earnings forecasts? Empirical evidence from China

Luo

Wang

2022

CAFR

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PurposeUsing a sample of 9,898 firm-year observations from 1,821 unique Chinese listed firms over the period from 2004 to 2019, this study aims to investigate whether the market rewards meeting or beating analyst earnings expectations (MBE).Design/methodology/approachThe authors use an event study methodology to capture market reactions to MBE.FindingsThe authors document a stock return premium for beating analyst forecasts by a wide margin. However, there is no stock return premium for firms that meet or just beat analyst forecasts, suggesting that the market is skeptical of earnings management by these firms. This market underreaction is more pronounced for firms with weak external monitoring. Further analysis shows that meeting or just beating analyst forecasts is indicative of superior future financial performance. The authors do not find firms using earnings management to meet or just beat analyst forecasts.Research limitations/implicationsThe authors provide evidence of market underreaction to meeting or just beating analyst forecasts, with the market's over-skepticism of earnings management being a plausible mechanism for this phenomenon.Practical implicationsThe findings of this study are informative to researchers, market participants and regulators concerned about the impact of analysts and earnings management and interested in detecting and constraining managers' earnings management.Originality/valueThe authors provide new insights into how the market reacts to MBE by showing that the market appears to focus on using meeting or just beating analyst forecasts as an indicator of earnings management, while it does not detect managed MBE. Meeting or just beating analyst forecasts is commonly used as a proxy for earnings management in the literature. However, the findings suggest that it is a noisy proxy for earnings management.

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“…M&A is an essential means to optimize the allocation of corporate resources and stimulate the vitality of firms [1][2][3], and can help firm improve their debt structure [4,5], optimize their organizational structure [4,6], promote their technological innovation [7][8][9], and improve their performance [6,10,11], which are strategically crucial for their high-quality development. According to the number of mergers and acquisitions by firms over a period, M&A can be classified into single M&A and serial M&A.…”

Section: Introductionmentioning

confidence: 99%

Geographical peer effect in serial mergers and acquisitions: The influence of social learning and director network

Zhang,

Song,

Liao

2023

PLoS ONE

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Based on the serial mergers and acquisitions(M&A) data of Chinese A-share listed companies from 2010 to 2019, this paper discusses whether there are geographical peer effects in serial M&A, and tests its mechanism and influence path. The empirical study shows that geographical peer decision-making has geographical peer effects in the decision-making of serial M&A, and the average number of serial M&A of geographical peers has a significant positive impact on the serial M&A decision-making of focal firms. Social learning and director networks are essential to produce geographical peer effects in serial M&A. The external learning mechanism shows that the geographical peer effect of serial M&A decision-making is partly caused by backward firms’ social learning to the leading peer firms’ decision-making, but vice versa. The director network relationship of focal firms can positively moderate the relationship between the geographical peer firms’ average serial M&A decision-making and the focal firm’s serial M&A decision-making. This paper reveals the mechanism of geographical peer effect in serial M&A decision-making and provides a new perspective to understand the motivation of serial M&A decision-making. These empirical findings not only provide important empirical evidence on serial M&A from developing countries such as China, but also provide a valuable reference for decision-makers and researchers of serial M&A in the future.

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Acquisitions and the cost of debt: Evidence from China

Cited by 11 publications

References 99 publications

Conditional Mandates on Management Earnings Forecasts: The Impact on the Cost of Debt

Conditional Mandates on Management Earnings Forecasts: The Impact on the Cost of Debt

Does the market reward meeting or beating analyst earnings forecasts? Empirical evidence from China

Geographical peer effect in serial mergers and acquisitions: The influence of social learning and director network

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