Target abnormal returns associated with acquisition announcements: Payment, acquisition form, and managerial resistance

Huang, Yu-Hsi; Walkling, Ralph A.

doi:10.1016/0304-405x(87)90008-0

Cited by 391 publications

(217 citation statements)

References 19 publications

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“…As for the methods of payment, we find that when acquisitions are paid in full either with cash or stock the effect is negative on the gains made by targets, but positive on bidders returns, in line with Huang and Walkling (1987) and Franks, Harris, and Titman (1991).…”

Section: Multivariate Analysismentioning

confidence: 76%

Corporate acquisitions and financial constraints

Khatami

Marchica

Mura

2015

International Review of Financial Analysis

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Using a large sample of US acquisitions made between 1985 and 2013, we study the effect of financial constraints on acquisition gains and acquisition likelihood. Our findings show that financial constraints of target companies significantly increase acquisition premiums and abnormal returns for both parties. Our results further show that the presence of financial constraints in the target is one of the most important determinants of a takeover bid. This supports the idea that acquisitions may improve the ability of financially constrained companies to access capital through a better reallocation of resources within segments of the same company (e.g., internal capital market) or through better access to external markets. This would eventually benefit bidders too, as new capital would be invested in valuable growth opportunities that otherwise would expire unexercised.JEL Classification: G32, G34

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Section: Multivariate Analysismentioning

confidence: 76%

Corporate acquisitions and financial constraints

Khatami

Marchica

Mura

2015

International Review of Financial Analysis

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“…Typically M&As invoke a higher degree of friendly managerial reactions (Huang & Walkling, 1987). In their study, authors find that 38% of the target management took neutral position as compared to 49% of target management who expressed favorable attitude.…”

Section: Friendly Versus Neutral Mandasmentioning

confidence: 92%

Long-term performance of mergers and acquisitions in ASEAN countries

Rao‐Nicholson

Salaber

Cao

2016

Research in International Business and Finance

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The study looks at mergers and acquisitions (M&As) in ASEAN countries and examines the post-M&A performance using data from 2001 to 2012. The industry-adjusted operating performance tends to decline in the 3 years following an M&A. Yet, the results suggest that M&As completed during the financial crisis are more profitable than those implemented before and/or after the crisis. We argue that this is mainly due to the synergies created between the firms' resources during the crisis which augur well for firms' economic performance. We find that, during the crisis, certain characteristics of the firms like the relative size of the target, cross-border nature of deals, acquirer's cash reserves and friendly nature of deals are important determinants of long-term post-M&A operating performance.However, for M&As during the crisis, there appears to be no relationship between performance and firms' characteristics linked to M&A activity such as payment method, industry relatedness and percentage of target's share acquired.

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“…These include: synergies (e.g.. Morck, Shleifer and Vishny, 1990;Sudarsanam, Holl andSalami, 1996 andHietala, Kaplan andRobinson, 2003), disciplining of inefficient or underperforming target management (e.g., Agrawal andJaffe, 2003 andHarford, 2003) and the differential tax treatment of alternative payment forms (e.g., Huang and Walkling, 1987;Draper andPaudyal, 1999 andDa Silva Rosa, Izan, Steinback andWalter, 2000).…”

Section: Takeover Premiums and The Role Of The Target Firm Auditormentioning

confidence: 99%

“…Cash takeover offers have been documented to be associated with increased takeover premiums (see : Huang and Walkling, 1987;Franks, Harris and Mayer, 1988;Draper and Paudyal, 1999;Da Silva Rosa, Izan, Steinback andWalter, 2000 andBugeja, 2005). Method of payment (PAYT) is controlled using an indicator variable that denotes takeovers where the initial takeover consideration is exclusively cash.…”

Section: Insert Table 1 Herementioning

confidence: 99%

Takeover Premiums and the Perception of Auditor Independence and Reputation

Bugeja¹

2009

SSRN Journal

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This study investigates if there is a positive association between takeover premiums and the bidder's perception of target firm auditor reputation and independence. Using auditor size as a proxy for auditor reputation, the results indicate that target shareholders receive a higher takeover premium when a Big 4 auditor audits the target firm in the year prior to the takeover announcement. This result is only significant however in the period prior to the highly publicised audit failures. The impact of perceived auditor independence on takeover premiums is studied using the levels and size of non-audit service (NAS) fees provided by the target firm auditor. Using three proxies for auditor independence, the results do not show an association between perceived auditor independence and takeover premiums. This finding is robust to partitioning the sample by auditor size, takeover hostility and splitting the sample into takeovers pre-and post-the corporate scandals that occurred in 2002.

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Target abnormal returns associated with acquisition announcements: Payment, acquisition form, and managerial resistance

Cited by 391 publications

References 19 publications

Corporate acquisitions and financial constraints

Corporate acquisitions and financial constraints

Long-term performance of mergers and acquisitions in ASEAN countries

Takeover Premiums and the Perception of Auditor Independence and Reputation

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