Bidder's Gain: Evidence from Termination Returns

Tang, Tilan

doi:10.1111/irfi.12059

Cited by 3 publications

(2 citation statements)

References 63 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Al-Sharkas (2003) and Travlos (1987) show a negative correlation between bidder abnormal return and relative size. Likewise, Tang (2015) show that acquisitions of small targets generate a larger gain than a combination of similar sized firms. On the other hand, e.g., Asquith, Bruner and Mullins (1983), show that the bidder's gain increases with the relative size of the target company to the bidder.…”

Section: The Effect Of Deal Characteristics On Bidder Gainsmentioning

confidence: 96%

Short Term Announcement Returns to the Bidder**

Högholm¹,

Knif²

2016

JCGIRM

View full text Add to dashboard Cite

In this paper we investigate the short term abnormal return to the bidding firm’s shareholders in takeover transactions in Finland during the time period from January 2000 to December 2013. Specific features of the market for corporate acquisitions in Finland are that almost all of the transactions are friendly acquisitions and usually aim for 100 % of the target company. We estimate the abnormal return around 314 individual takeover announcements and investigate determinants of the abnormal returns. Our results show that the takeover announcement on average yields a positive abnormal return to the bidding firm’s shareholders, thus, support the value creating hypothesis. The announcement effect on the announcement day is1.4 % and statistically significant. Both pre-event and post-event abnormal returns are statistically insignificant, although there is sign of a negative revaluation in the post-event period. Among the takeover characteristics, we document a significant impact on the bidder’s abnormal return on the announcement day for small deals yielding a higher abnormal return, but a positive relationship between the announcement effect and the relative size of the deal, cross-border deals giving a smaller abnormal return, and indication of diversification deals giving a higher abnormal return to the bidder’s shareholders.

show abstract

Section: The Effect Of Deal Characteristics On Bidder Gainsmentioning

confidence: 96%

Short Term Announcement Returns to the Bidder**

Högholm¹,

Knif²

2016

JCGIRM

View full text Add to dashboard Cite

show abstract

“…In the literature, there are some related studies which have focussed on analysing successful or failed takeover deals from various perspectives. Tang (2015), for example, examine acquirers' termination returns in failed deals and find that acquirer gains vary significantly depending on target type. Becher et al (2015) analyse the impact of analyst recommendations on the probability of deal success and find that it increases (decreases) along with the favourability of acquirer (target) recommendations.…”

Section: Introductionmentioning

confidence: 99%

Probability of mergers and acquisitions deal failure

Tanna

Yousef

Nnadi

2020

JFEP

View full text Add to dashboard Cite

Purpose The purpose of this paper is to investigate whether the probability of deal success/failure in mergers and acquisitions (M&As) transactions is influenced by a range of deal, firm and country-specific characteristics which tend to affect acquirers’ shareholder returns. The specific hypotheses under investigation relate to the method of payment (cash versus stock), target status (listed versus non-listed), diversification (domestic versus cross-border and industry-wide) and acquirers’ prior bidding experience. Additionally, the authors also investigate whether announced deals reflect an expectation about likelihood of deal completion. Design/methodology/approach The authors analyse the probability of deal success/failure in M&As by combining event study and probit regression-based methods. The authors use the standard event study methodology to calculate acquirers’ abnormal returns for up to 10 days before and after the announcement date. In the probit model, the dependent variable is the probability of deal i being failure depending on four sets of explanatory variables: method of payment, target status, diversification and acquirer bidding experience, along with a set of control variables. Findings The findings from event study confirm that market reaction is indifferent to whether announced deals are likely to be successfully completed or not, consistent with the efficient markets hypothesis. However, the results from cross-sectional, cross-country regressions confirm that the aforementioned deal characteristics, as well as certain firm and country level attributes do influence the likelihood of whether an announced deal is subsequently completed or terminated. Originality/value In examining whether the specific characteristics affecting the likelihood that M&A transactions, once announced, will ultimately succeed or fail, it seems natural to ask whether the market reaction at the time of deal announcement reflects an expectation regarding deal completion. This could be associated with specific deal or firm-level characteristics influencing shareholder returns or risk, and represents a unique contribution of this study, over and above the use of a global sample of M&A data. The empirical analysis investigates these issues by using an extensive, global sample of 46,758 M&A transactions from 180 countries and 80 industries, which took place between the years 1977 and 2012.

show abstract