Short- And Long-Term Wealth Gains From UK Takeovers: The Case Of The Financial Industry

Boubaker, Sabri; Hamza, Taher

doi:10.19030/jabr.v30i4.8673

Cited by 7 publications

(3 citation statements)

References 39 publications

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“…This research consistent with Boubaker and Hamza (2014b) research when they investigate depending on event study the short and long-term wealth gains from UK takeovers from (1996)(1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007). They mention that in the short term, the bidder achieves negative CAARs, whereas in the long term, they have positive gains.…”

Section: Strategic Investment Acquisitionssupporting

confidence: 87%

Strategic investment acquisitions performance in UK firms: the impact of managerial overconfidence

Adel

Alkaraan

2019

JFRA

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Purpose This paper focuses on the influence of overconfident managers on strategic investment acquisitions performance, by investigating the influence of key contextual factors on acquirers’ returns of UK domestic and cross-border acquisitions during the period 2000-2009. In this study, particular attention has been paid to management attributes (frequent acquirers vs non-frequent acquirers); method of payment (cash vs non-cash deals); the geographic scope (domestic vs cross-border deals); the type of the target (public vs private); the industry scope; and the relative size. Design/methodology/approach An event study is used to analyse domestic and cross-border acquisitions. The market model is used for estimating the acquirers’ abnormal returns of 1,133 domestic and cross-border acquisitions by UK firms between 1 January 2000 and 31 December 2009. Findings The findings reveal that acquirers with domestic targets have higher returns than cross-border targets. Infrequent acquirers generate higher returns from domestic and cross-border acquisitions than frequent acquirers. Further, acquirers that acquire domestic targets from different industrial sectors produce higher returns than acquirers with targets from the same sector. Acquirers with cash deals, private targets and high book-to-market ratio generate significant returns compared to acquirers with non-cash deals, low book-to-market ratio and public targets and that for domestic and cross-border deals. These results suggest that UK domestic and cross-border acquisitions are partially shaped by overconfident managers. Research limitations/implications The study has a number of limitations, including the use of the market model, the data-collection process and the limited number of contextual factors. Future research may examine a number of avenues related to the current study, including incorporating the acquiring firms’ financial characteristics. Practical implications The study provides a better understanding of the influence of contextual factors on the success and failure of strategic investment projects such as acquisitions. Results of post-acquisitions performance in UK firms show how estimation of value can be distracted at the pre-acquisition stage because of overconfident managers. Originality/value Results of post-acquisitions performance in UK firms show how estimation of value can be distracted at the pre-acquisition stage because of overconfident managers.

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Section: Strategic Investment Acquisitionssupporting

confidence: 87%

Strategic investment acquisitions performance in UK firms: the impact of managerial overconfidence

Adel

Alkaraan

2019

JFRA

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“…Similar evidence of negative market performance is also reported in a considerable number of other studies (Walker, 2000; Sudarsanam and Mahate, 2006; Antoniou et al , 2007; Masulis et al , 2007; Alexandridis et al , 2010; Jory and Ngo, 2011; Chronopoulos et al , 2013). Boubaker and Hamza (2014) investigate the relationship between short term and long-term performance of acquirers. They find that on the short term, acquirers suffer negative returns but enjoy positive returns on the long run.…”

Section: Hypotheses Developmentmentioning

confidence: 99%

An exploratory study of US acquirers’ market performance: pre- versus post-Sarbanes–Oxley act of 2002

Hajjar

Menassa

Kassamany

2021

JFRA

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Purpose Motivated by the findings of Bhabra and Hossain (2017) that highlight an improvement in US market performance in the post-Sarbanes–Oxley (SOX) period, this paper aims to investigate how this change varies with the methods of payment used for the deals. Design/methodology/approach Deductive in nature and using an event study approach, this paper uses a sample of 675 deals between 1999 and 2006 to test three research hypotheses in a pre-post setting. Findings Results show that at the aggregate level, there is a significant improvement in the market performance of US acquirers around the announcement day in the aftermath of the passage of SOX 2002. Considered separately, both US stock acquirers and cash acquirers did not experience any significant improvement in market performance in the post-Sarbanes–Oxley period. These results are robust to controlling for governance, firm and deal variables, as well as industry and year fixed effects. Research limitations/implications Exploratory in nature, the results are to be interpreted in light of the sample size and the period under investigation. Practical implications The results provide evidence for regulators and legislators on the contribution of SOX 2002 to curbing managerial misconduct. Significant improvement in the market performance also signals more confidence in managerial decisions and a reduction in agency problems. The insignificant change in stock acquirersâ€™ market performance can be an indication that policymakers should exert more efforts to improve shareholders' confidence in the quality of disclosure. Originality/value This investigation provides unique insights on whether SOX has been effective in mitigating mispricing concerns associated with stock-financed acquisitions and whether it was effective in moderating the governance mechanism associated with cash-financed acquisitions.

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“…Shareholders of bidding firms and the bondholders reaped no gains. Boubaker and Hamza (2014) investigated the short and long term stock returns positions of acquiring financial firms of UK over the period 1996-2007 and also the association between short-term abnormal return and the long-term performance. The event study method pointed out that the wealth of the bidders encountered significant decline in the short-term.…”

Section: Studies On Stock Market Performance Measuresmentioning

confidence: 99%

Mergers and acquisitions: A comparative review of literature

Ghosh¹,

Dutta²

2016

Industrija

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Short- And Long-Term Wealth Gains From UK Takeovers: The Case Of The Financial Industry

Abstract: The present study analyzes the short-and long-term performance of UK financial acquiring firms by examining a sample of 40 takeovers over the period 1996-2007

Cited by 7 publications

References 39 publications

Strategic investment acquisitions performance in UK firms: the impact of managerial overconfidence

Strategic investment acquisitions performance in UK firms: the impact of managerial overconfidence

An exploratory study of US acquirers’ market performance: pre- versus post-Sarbanes–Oxley act of 2002

Mergers and acquisitions: A comparative review of literature

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