The appeal of private targets in international acquisitions

Madura, Jeff; Susnjara, Jurica

doi:10.1016/j.intfin.2012.12.005

Cited by 17 publications

(13 citation statements)

References 35 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…30 Figure 9 depicts the estimated quantity-weighted average marginal values in each auction normalized by subtracting the corresponding EONIA swap rate (a very similar pattern obtains if we normalized by the EUREPO rate). The emerging pattern again suggests that the (normalized) marginal values for liquidity provided in the primary market increased substantially following the 30 Since the goal of the ECB is to target the overnight interest rate, of which the 1-w EONIA swap rate is an expectation, this suggests that the ECB might have faced some problems with achieving its objectives in the postturmoil period. …”

Section: Resultsmentioning

confidence: 99%

“…Most of the bidders in our data set are not publicly traded, thus publicly available information on these institutions is largely limited to quarterly or sometimes annual financial statements that are disclosed by these firms. Using Bankscope, we construct measures of return-on-equity (ROE) and return-on-assets (ROA), 42 which are standard performance indicators in the banking literature (Madura (2008)). We also compute the cost-to-…”

Section: Estimated Marginal Values and Bank Balance Sheetsmentioning

confidence: 99%

See 1 more Smart Citation

The 2007 Subprime Market Crisis Through the Lens of European Central Bank Auctions for Short-Term Funds

2013

Econometrica

View full text Add to dashboard Cite

We study European banks' demand for short‐term funds (liquidity) during the summer 2007 subprime market crisis. We use bidding data from the European Central Bank's auctions for one‐week loans, their main channel of monetary policy implementation. Our analysis provides a high‐frequency, disaggregated perspective on the 2007 crisis, which was previously studied through comparisons of collateralized and uncollateralized interbank money market rates which do not capture the heterogeneous impact of the crisis on individual banks. Through a model of bidding, we show that banks' bids reflect their cost of obtaining short‐term funds elsewhere (e.g., in the interbank market) as well as a strategic response to other bidders. The strategic response is empirically important: while a naïve interpretation of the raw bidding data may suggest that virtually all banks suffered an increase in the cost of short‐term funding, we find that, for about one third of the banks, the change in bidding behavior was simply a strategic response. We also find considerable heterogeneity in the short‐term funding costs among banks: for over one third of the bidders, funding costs increased by more than 20 basis points, and funding costs vary widely with respect to the country‐of‐origin. The funding costs we estimate using bidding data are also predictive of market‐ and accounting‐based measures of bank performance, reinforcing the usefulness of “revealed preference” information contained in bids.

show abstract

Section: Resultsmentioning

confidence: 99%

Section: Estimated Marginal Values and Bank Balance Sheetsmentioning

confidence: 99%

The 2007 Subprime Market Crisis Through the Lens of European Central Bank Auctions for Short-Term Funds

2013

Econometrica

View full text Add to dashboard Cite

show abstract

“…An asset acquisition resembles the acquisition of stand‐alone private firms and subsidiaries of other firms because they are categorized as unlisted targets. These targets are traded at considerable discounts relative to comparable publicly traded assets to account for the lack of liquidity (Madura & Susnjara, 2013; Officer, 2007). As such, the prospect of finding undervalued assets is high.…”

Section: Literature Review Hypothesis Development and Cross‐sectional Predictionsmentioning

confidence: 99%

“…A combination of this overpaying behavior and the documented adverse market reaction to the announcement of such bids implies an expropriation of current debtholders' wealth (Andrade et al, 2001). In contrast, the lack of an active secondary market combined with sellers' urgent need for liquidity enhance the possibility of deep discount in asset acquisitions (Brown et al, 1994; Gilson, 1990; Madura & Susnjara, 2013; Officer, 2007). Such arguments consolidate our conjecture that acquirers with debt covenants face less adversity from their debtholders in an asset acquisition as opposed to an equity acquisition.…”

Section: Introductionmentioning

confidence: 99%

Debt covenants and asset versus equity acquisitions

Jory

Ngo

Nguyen

2021

J of Financial Research

View full text Add to dashboard Cite

We examine whether the presence of loan covenants leads firms to choose either an asset or equity acquisitions. Asset acquisitions involve the selective purchase of a target company's assets, and equity acquisitions involve acquisitions of common stocks. We document that firms with loan covenants are more likely to engage in asset acquisitions as opposed to equity acquisitions. Our results are robust to alternative measures of loan covenants and to endogeneity concerns. Furthermore, the association between loan covenants and asset acquisitions is stronger among firms with greater debt covenant intensity, more severe agency problems, and lower profitability. Acquirers facing more intense competition within their industries are also likely to choose asset acquisitions. Our findings suggest that acquirers' incentives to avoid wealth transfer at the expense of debtholders drive the relation between debt covenants and choice of acquisition structure.

show abstract

“…Markets are complex systems in which many trader agents interact with each other (Markose, 2005). Every market is governed by a market institution (Madura, 2015; Mishkin and Eakins, 2015). A market institution specifies which bids and asks can be made and when and how a transaction takes place according to these bids and asks.…”

Section: Introductionmentioning

confidence: 99%

Fuzzy logic-based bidding strategies in dynamic double auctions

Unal

Aladağ

2019

View full text Add to dashboard Cite

Purpose Double auctions are widely used market mechanisms on the world. Communication technologies such as internet increased importance of this market institution. The purpose of this study is to develop novel bidding strategies for dynamic double auction markets, explain price formation through interactions of buyers and sellers in decentralized fashion and compare macro market outputs of different micro bidding strategies. Design/methodology/approach In this study, two novel bidding strategies based on fuzzy logic are presented. Also, four new bidding strategies based on price targeting are introduced for the aim of comparison. The proposed bidding strategies are based on agent-based computational economics approach. The authors performed multi-agent simulations of double auction market for each suggested bidding strategy. For the aim of comparison, the zero intelligence strategy is also used in the simulation study. Various market outputs are obtained from these simulations. These outputs are market efficiencies, price means, price standard deviations, profits of sellers and buyers, transaction quantities, profit dispersions and Smith’s alpha statistics. All outputs are also compared to each other using t-tests and kernel density plots. Findings The results show that fuzzy logic-based bidding strategies are superior to price targeting strategies and the zero intelligence strategy. The authors also find that only small number of inputs such as the best bid, the best ask, reference price and trader valuations are sufficient to take right action and to attain higher efficiency in a fuzzy logic-based bidding strategy. Originality/value This paper presents novel bidding strategies for dynamic double auction markets. New bidding strategies based on fuzzy logic inference systems are developed, and their superior performances are shown. These strategies can be easily used in market-based control and automated bidding systems.

show abstract

The appeal of private targets in international acquisitions

Cited by 17 publications

References 35 publications

The 2007 Subprime Market Crisis Through the Lens of European Central Bank Auctions for Short-Term Funds

The 2007 Subprime Market Crisis Through the Lens of European Central Bank Auctions for Short-Term Funds

Debt covenants and asset versus equity acquisitions

Fuzzy logic-based bidding strategies in dynamic double auctions

Contact Info

Product

Resources

About