Glamour Acquirers, Method of Payment and Post-Acquisition Performance: The UK Evidence

Sudarsanam, P.S.; Mahate, Ashraf A.; Freeman, Alan

doi:10.2139/ssrn.277479

Cited by 103 publications

(112 citation statements)

References 43 publications

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“…The correlation coefficient between the GNH variable and abnormal returns is positive and statistically significant at the 5% level, offering the first indication of sentiment having a significant relation with bidder abnormal returns. In line with the literature (e.g., Sudarsanam and Mahate, 2003), abnormal returns are also related with the control variables used, and some of the control variables are correlated. There is, however, no issue of collinearity (as the highest correlation coefficient is less than 0.48), and the significant correlations among the control variables are acceptable for the purpose of the study, since we are not focusing on the relation of each control variable with abnormal returns, but rather on whether GNH is related to bidder announcement returns after controlling for potential variables that are related with companies' stock returns.…”

Section: Data Descriptionsupporting

confidence: 58%

“…Stock is a dummy equal to 7 Vitrue (2010) reports that Facebook activity peaks at 3pm, and is present after the closure of stock markets. 8 Studies include those by Asquith et al (1983), Travlos (1987), Rau and Vermaelen (1998), Sudarsanam and Mahate (2003), Faccio and Masulis (2005), Titman et al (2004), Draper and Paudyal, (2006), and Danbolt and MacIver (2012).…”

Section: Data Descriptionmentioning

confidence: 99%

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Investor sentiment and bidder announcement abnormal returns

Danbolt

Siganos

Vagenas‐Nanos

2015

Journal of Corporate Finance

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We introduce the significance of a direct sentiment proxy as an explanatory variable of bidder announcement returns. We argue that sentiment subconsciously influences investor perception of potential merger synergies and risks, and therefore relates to bidder abnormal returns. We proxy daily sentiment based on Facebook status updates across seventeen international markets and show that there is a positive relation between sentiment and bidder announcement returns. In line with behavioral literature stating that sentiment more heavily influences uninformed traders, this relation is more pronounced in acquisitions with a low percentage of blockholder ownership, acquisitions of US public targets, and acquisitions of large targets relative to the size of the bidders. Our study goes beyond the conventional sentiment and stock market returns literature, uncovering a significant relation between sentiment and firm-specific abnormal returns to acquiring companies.

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Section: Data Descriptionsupporting

confidence: 58%

Section: Data Descriptionmentioning

confidence: 99%

Investor sentiment and bidder announcement abnormal returns

Danbolt

Siganos

Vagenas‐Nanos

2015

Journal of Corporate Finance

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“…In the UK, Cosh and Guest (2001), Sudarsanam and Mahate (2003) BHARs of -7.90% over the five-year post announcement period. Fama and French (1993) propose that the three-factor asset-pricing model be employed to examine long-term abnormal performance because the returns can be described by the size and book-to-market factors.…”

Section: Buy-and-hold Abnormal Returnsmentioning

confidence: 99%

The Performance of REIT Acquirers in the Post-Merger Period

Ratcliffe¹,

Dimovski²,

Keneley³

2017

24th Annual European Real Estate Society Conference

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Executive SummaryMergers and acquisitions are a feature of modern economies. However, research on conventional bidding firms in mergers and acquisitions (M&As) has shown, on average, shareholders are worse off in the long-run (Alexandridis, Mavrovitis and Travlos, 2012). This study examines the long-term post merger performance of US Equity Real Estate Investment Trusts (REITs) to see if this underperformance extends to the largest REIT sector in the world. In contrast to the earlier REIT data samples used by Campbell, Giambona and Sirmans (2009), we find, prior to the macroeconomic event of the financial crisis, that existing shareholders of bidding firms earn significant and positive abnormal returns. This outcome supports the synergy motive for M&As in the REIT sector. Results from announcements occurring after the onset of the financial crisis show signs of negative and significant abnormal returns, suggesting these M&As were driven by the agency and/or hubris motive.Keywords REITs, Equity REITs, Mergers and Acquisitions, Post-merger abnormal returns JEL Classifications G11; G14; G34 2 INTRODUCTIONMergers and acquisitions are an ongoing process as markets respond to internal and external pressures.A key issue arising from this activity is the extent to which it promotes efficient market outcomes.From an economic perspective, mergers and acquisitions (M&As) should provide for the efficient management of companies, improved mobility of capital and an efficient allocation of scarce resources (Manne, 1965). However, there is growing evidence of underperformance of bidding firms shares in the years following the M&A announcement (Alexandridis, Mavrovitis and Travlos, 2012, Bessembinder and Zhang, 2013). Jensen and Ruback (1983, p.20) comment 'these post-outcome negative abnormal returns are unsettling because they are inconsistent with market efficiency and suggest that changes in stock prices overestimate the future efficient gains from mergers'. Such arguments are supported by Campbell, Giambona and Sirmans (2009) who argue that these types of results are troubling as they suggest the existence of weak form market efficiency. The ensuing informational problems translate into an inefficient allocation of resources.Whilst the debate surrounding the issue of post merger performance continues, one issue that has received less attention is that of the motivations of acquiring firms. If acquiring firms do not reap the returns expected, why do they engage in such activities? Berkovitch and Narayanan (1993) identify several motives for M&As; namely the synergy motive, the hubris hypothesis and the agency motive.The post-announcement under-performance of acquirers suggests that the motivation for M&As may be a result of hubris and/or agency issues rather than efficiency considerations (Alexandridis, Mavrovitis and Travlos, 2012, Ang, Yingmei and Nagel, 2008, Conn, Cosh, Guest and Hughes, 2005. September 2014 suggest that the REIT M&A market is informationally efficient. We find no significant negative abnormal perfor...

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“…Consequently, an acquisition announcement paid with equity will emit a negative signal about the bidder's shares and thus trigger a negative price reaction (Travlos, 1987;Sudarsanam and Mahate, 2003;Moeller et al, 2004). When a cash offer is made to a target firm, its share price increases significantly more than in the case of an all-equity offer.…”

Section: Firm and Transaction Characteristicsmentioning

confidence: 99%

Takeovers and (Excess) CEO Compensation

Feito-Ruiz

Renneboog

2017

SSRN Journal

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Abstract.We study if a CEO's equity-based compensation affects the expected value generation in takeovers. When the objectives of management and shareholders are more aligned, as proxied by the use of equity-based compensation, more value-maximizing acquisitions are expected. Whereas in widely-held firms the decision power is with the management, in firms with concentrated ownership the decision power may be with major blockholders. This may entail that ownership concentration and equity-based pay are substitutes. We find a strongly positive relation between equity-based compensation and cumulative abnormal announcement returns at takeovers, but this relation is eroded when dominant share blocks are held by corporations, which confirms the substitution effect. Powerful CEOs in companies with weak boards and without actively monitoring shareholders may set their own pay which could lead to excesses. We relate excess pay to how takeover decisions are received by the market, and demonstrate that excess compensation negatively affects the acquirer's stock valuation at a takeover announcement. The market is thus able to identify firms with agency problems and is cautious in its expectations about potential value creation by means of acquisitions.

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Glamour Acquirers, Method of Payment and Post-Acquisition Performance: The UK Evidence

Cited by 103 publications

References 43 publications

Investor sentiment and bidder announcement abnormal returns

Investor sentiment and bidder announcement abnormal returns

The Performance of REIT Acquirers in the Post-Merger Period

Takeovers and (Excess) CEO Compensation

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