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Article
Publication date: 31 December 2020

Sheng-Hung Chen, Feng-Jui Hsu and Ying-Chen Lai

There is little known globally on the association among the independent shareholder, board size and merger and acquisition (M&A) performance. This paper addresses the…

Abstract

Purpose

There is little known globally on the association among the independent shareholder, board size and merger and acquisition (M&A) performance. This paper addresses the global issue about cross-border M&A in banking sector, particularly exploring the role of difference in the independent shareholder and board size between acquirer and target banks on synergy gains based on the international study.

Design/methodology/approach

Based on cross-border bank M&As data on 59 deals from 1995 to 2009, we initially apply social network analysis techniques to explore the country connectedness of the acquirer-target banks in cross-border M&As. Ordinary least squares (OLS) with robust standard errors is further used to investigate synergy gains within the difference in the degree of bank independent shareholder and board sizes between the acquirer and target banks.

Findings

Our results indicate that the acquiring banks are generally interconnected with the targeted banks and that some of acquiring banks are clearly concentrated in Asian countries including China, Hong Kong, and Philippines. Moreover, we find that cross-border M&As with larger difference in independent shareholders between the bidder and target bank would result in higher synergy gains in all cases of takeover premiums on 1 day, 1 week and 4 weeks. In addition, financial differences between the bidder and target banks have a significant impact on synergetic gains, a topic not explored in previous studies. There is no evidence that institutional and governance differences between bidder and target bank have significant cross-border impacts on takeover premiums with respect to 1 day, 1 week and 4 weeks, respectively.

Originality/value

This paper contributes to the literature by exploring the international issue about the role of difference in the degree of bank independent shareholder and board sizes between acquirer and target banks on synergy gains. Based on bank cross-border M&As data on 59 deals from 1995 to 2009, we initially apply social network analysis to explore the country connectedness of acquirer-target bank in cross-border M&As, while ten ordinary least squares (OLS) with robust standard errors is used to investigate synergy gains within the difference in the degree of bank independent shareholder and board sizes between acquirer and target banks.

Details

Library Hi Tech, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0737-8831

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Book part
Publication date: 15 June 2018

Elisa Labbas, Padma Rao Sahib and Trang Thu Doan

Many announced cross-border mergers and acquisitions (M&As) are never brought to completion despite potential negative consequences to acquirers and targets. This paper…

Abstract

Many announced cross-border mergers and acquisitions (M&As) are never brought to completion despite potential negative consequences to acquirers and targets. This paper presented evidence on the dynamic effects of spatial distance and two industry-level characteristics, namely industry relatedness between the two firms and technological intensity, on the completion likelihood of cross-border M&A deals. Based on a sample of 8,489 M&A transactions we found that the completion likelihood of cross-border M&As increases with spatial distance. The effect is more pronounced for deals across technology-based industries, evidence for related deals is inconclusive.

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Book part
Publication date: 29 September 2021

Konstantinos Bozos, Vassiliki Bamiatzi and Tamer Cavusgil

Organizational and cultural misfits have been among the most vital factors associated with Mergers and Acquisitions (M&A) failure. Admittedly, in a foreign environment…

Abstract

Organizational and cultural misfits have been among the most vital factors associated with Mergers and Acquisitions (M&A) failure. Admittedly, in a foreign environment, such problems can be further amplified due to the liability of foreignness, increased information asymmetries and additional transaction costs, further hampering the success of the deal. Considering that, in 2019 alone, the value of cross-border acquisitions (CBAs) exceeded $1.2 trillion (out of $3.9 trillion of the total global M&A value), deciphering the “black box” of CBA success comes at the forefront of the academic and managerial interest. In this chapter, the authors examine a missing link on the post-acquisition performance for cross-border deals, the role of organizational slack. The authors particularly theorize that slack may benefit foreign acquirers, by sheltering them against liability of foreignness and acculturation costs; yet this benefit will be conditional upon the type of slack and the acquirer’s prior CBA experience.

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Article
Publication date: 19 June 2019

Krishna Reddy, Muhammad Qamar and Noel Yahanpath

The purpose of this paper is to study whether mergers and acquisitions (M&As) create value in Indian and Chinese markets.

Abstract

Purpose

The purpose of this paper is to study whether mergers and acquisitions (M&As) create value in Indian and Chinese markets.

Design/methodology/approach

The authors study abnormal returns (AR) created by the acquiring firms in Indian and Chinese markets relating to M&A announcements, using the following three different statistical methods: i.e. mean, market and ordinary least squares adjusted return models.

Findings

On average, M&A announcements do not create value for the firms in Chinese and Indian economies. For the mean model, M&As create value for Chinese firms, whereas for the Indian firms no such value is created for the same event windows. The regression results showed that debt has a positive impact on the AR and cumulative average abnormal returns at 1, 5 and 10 per cent significance levels, respectively.

Research limitations/implications

This study suggests increasing the sample size and period and using the instrumental variables regression to ensure the estimator’s impartiality, consistency and efficiency. With the investigative period surrounding a financial crisis, the estimators may have omitted bias.

Originality/value

Multiple methods used in this paper made it possible to capture the level of method variance in the AR, which is unusual in the Chinese and Indian context. Hence, the current study provides local knowledge and further strengthens the literature about M&As. The authors also regress AR with firm-specific factors, the consideration of which is scarce in the previous literature. Furthermore, much of what the authors know about M&A is relevant to developed economies.

Details

Studies in Economics and Finance, vol. 36 no. 2
Type: Research Article
ISSN: 1086-7376

Keywords

Content available
Article
Publication date: 6 April 2021

Veronika Vinogradova

The paper investigates the market performance of strategic acquisitions for growth in the fifth and sixth merger waves and outlines the major determinants that affect the…

Abstract

Purpose

The paper investigates the market performance of strategic acquisitions for growth in the fifth and sixth merger waves and outlines the major determinants that affect the performance of acquiring companies in these most complex and most challenging corporate transactions.

Design/methodology/approach

To perform the quantitative analysis a unique data sample was built out of acquisitions performed in the 5th and 6th merger waves with an only single purpose – strategic growth. Their performance was first analyzed using the method of market-based event study. In addition, the impact of several non-accounting determinants identified through a thorough literature review was tested using univariate/multivariate regression analysis.

Findings

The new findings of the study state that strategic acquisitions for growth created more value for acquiring companies if they were completed internationally and involved an acquisition of a middle-sized company. Moreover, the acquisition of targets in the less related industries (2-SIC) led to stronger performance of acquirers, especially in the international settings.

Research limitations/implications

The study suggests additional directions for future research. The future analysis can investigate the post-merger acquisition performance of strategic acquirers and can focus on additional financial (accounting) determinants in the evaluation of performance. This perspective can not only address the limitations imposed by the assumption of efficient capital markets but also provide additional insights.

Practical implications

The results of current study have important implications for executives performing M&A for growth. They show that the market reaction to M&A announcement can be at least partially anticipated and help managers to plan their strategic moves based on a defined set of variables.

Social implications

The study contributes to the sustainable, value-creating growth dynamics and encourages Executives to “lead for value.”

Originality/value

(1) In contrast to the existing studies that do not differentiate between the transaction rationale in their analysis, this paper focuses explicitly only on those acquisitions that have strategic growth as their primary objective and responses therefore, to the problem stated by Halpern (1983). This approach helps to mitigate the distortion of results and make a reliable assessment of the strategic move. (2) The results of quantitative analysis also outline that acquisition of mid-sized targets and larger degree of diversification (2-SIC, international focus) code were associated with higher value creation.

研究目的

本文旨在研究於第五和第六波的併購浪潮中為增長而作出的策略性收購的市場表現;本文亦概述在這些極其複雜的和極具挑戰性的公司交易中影響作收購公司的表現的主要因素.

研究設計/方法/理念

為了能進行定量分析,研究人員收集在第五及第六波的併購浪潮中以策略性增長為唯一目的的收購個案、建立一個獨特的數據樣本。研究人員首先以基於市場的事件研究法分析那些進行了收購的公司的表現,並以單變量/多變項迴歸分析法去試驗那幾個透過深入的文獻研究而找到的非會計的決定因素的影響.

研究結果

研究得出的新發現是、如果以增長為目的的策略性收購是於國際間完成及涉及收購中型公司的話,則這收購行動會給進行收購的公司帶來更多價值。而且、如果收購目標的產業與作收購公司的不太相關的話 (2-標準產業分類),收購行動會為進行收購的公司帶來更強的表現、特別是在國際環境下進行這收購行動.

研究的原創性/價值

(1) 有別於現時其它於其分析中不區分交易理由的研究,本文明確地表示只集中探討那些以帶來策略性增長為主要目標的收購;因此、本研究對 (哈爾彭,1983年)(Halpern, 1983) 陳述的問題作出了回應。本研究的理念有助於減輕我們對收購結果的曲解,從而讓我們對策略性行動能作出可靠的評估. (2) 定量分析的結果、亦概述了以中型公司為目標的收購及更大程度的多樣化 (2-標準產業分類、以國際為焦點) 代碼與創造更大價值是有關聯的。

對日後研究的作用/實際影響

本研究的結果對學術界及管理人員均具吸引力,亦為策略規劃提供一個額外的工具.

對社會的影響

本研究可帶來可持續的及可創造價值的增長動力,又可鼓勵行政主管採用以價值為本的領導方針.

Details

European Journal of Management and Business Economics, vol. 30 no. 3
Type: Research Article
ISSN: 2444-8451

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Article
Publication date: 29 March 2013

M. Kabir Hassan, Benito Sanchez and M. Faisal Safa

This paper aims to examine the impact of financial liberalization and foreign Islamic bank entry on the performance of domestic Islamic banks, and credit availability to…

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4873

Abstract

Purpose

This paper aims to examine the impact of financial liberalization and foreign Islamic bank entry on the performance of domestic Islamic banks, and credit availability to the private sector.

Design/methodology/approach

The authors use the weighted least squares method to estimate four models. These models are suggested by Lee. For this, the inverse of the number of domestic Islamic banks in each period is used to weight the observations in the regressions to correct for varying number of bank observations in each country.

Findings

The results indicate that foreign Islamic banks, on average, follow aggressive financing in host countries and enjoy higher net profit margin. Banking sector returns play an important role in the entry decision and presence of foreign banks. Moreover, favorable macro‐economic conditions play a supportive role while higher tax policies play a hostile role for the entry and presence of foreign Islamic banks. The recent financial crisis does not seem to affect the entry decision significantly. But the profitability of domestic Islamic banks has been seriously affected by the recent crisis. Also domestic tax policy and macro‐economic environment play important roles in determining the domestic Islamic bank performance. Results also indicate that private sector credit availability seems to suffer because of higher tax and reserve rate.

Practical implications

The authors' findings suggest that host Islamic economies should strive for an efficient capital market with supportive macro‐economic environment, which in turn helps the local banking sector to develop and benefit from the foreign Islamic bank entry.

Originality/value

This is the first paper to analyze the entry of foreign Islamic banks in the host countries with Islamic banking sector.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 6 no. 1
Type: Research Article
ISSN: 1753-8394

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Article
Publication date: 3 October 2016

K.S. Reddy, En Xie and Yuanyuan Huang

Drawing attention to the significant number of unsuccessful (abandoned) cross-border merger and acquisition (M&A) transactions in recent years, the purpose of this paper…

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3161

Abstract

Purpose

Drawing attention to the significant number of unsuccessful (abandoned) cross-border merger and acquisition (M&A) transactions in recent years, the purpose of this paper is to analyze three litigated cross-border inbound acquisitions that associated with an emerging economy – India, such as Vodafone-Hutchison and Bharti Airtel-MTN deals in the telecommunications industry, and Vedanta-Cairn India deal in the oil and gas exploration industry. The study intends to explore how do institutional and political environments in the host country affect the completion likelihood of cross-border acquisition negotiations.

Design/methodology/approach

Nested within the interdisciplinary framework, the study adopts a legitimate method in qualitative research, that is, case study method, and performs a unit of analysis and cross-case analysis of sample cases.

Findings

The critical analysis suggests that government officials’ erratic nature and ruling political party intervention have detrimental effects on the success of Indian-hosted cross-border deals with higher bid value, listed target firm, cash payment, and stronger government control in the target industry. The findings emerge from the cross-case analysis of sample cases contribute to the Lucas paradox – why does not capital flow from rich to poor countries and interdisciplinary M&A literature on the completion likelihood of international takeovers.

Practical implications

The findings have several implications for multinational managers who typically involve in cross-border negotiations. The causes and consequences of sample cases would help develop economy firms who intend to invest in emerging economies. The study also offers some implications of M&A for telecommunications and extractive industries.

Originality/value

Although a huge amount of extant research investigates why M&A fail to create value to the shareholders during the public announcement and post-merger stages, there is a significant dearth of research on the causes and consequences of delayed or abandoned national and international deals. The paper fills this knowledge gap by discussing an in-depth cross-case analysis of Indian-hosted cross-border acquisitions.

Details

Journal of Organizational Change Management, vol. 29 no. 6
Type: Research Article
ISSN: 0953-4814

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Article
Publication date: 1 July 2009

Martin Renze‐Westendorf, Dirk Schiereck and Felix Zeidler

We study the wealth effects of 177 domestic and cross‐border acquisitions announced by Spanish corporations between 1990 and 2004. Our findings show that domestic…

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1779

Abstract

We study the wealth effects of 177 domestic and cross‐border acquisitions announced by Spanish corporations between 1990 and 2004. Our findings show that domestic transactions significantly outperform international transactions. However, controlling for several firm and transaction characteristics, we do not find any cross‐border effect for acquisitions of Spanish firms. Short‐term valuation is driven by three factors in particular. Target size and bidder’s profitability negatively affect announcement returns, whereas transactions in related industries have a positive effect. Our results may indicate that in contrast to prior empirical findings, international diversification incurs higher costs than synergies and is, among others, driven by managerial and ownership factors.

Details

Management Research: Journal of the Iberoamerican Academy of Management, vol. 7 no. 2
Type: Research Article
ISSN: 1536-5433

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Article
Publication date: 15 March 2011

Bikram Jit Singh Mann and Reena Kohli

This paper seeks to compare target shareholders' wealth gains in domestic and cross‐border acquisitions in India. Two existing schools of thought namely, the industrial…

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3203

Abstract

Purpose

This paper seeks to compare target shareholders' wealth gains in domestic and cross‐border acquisitions in India. Two existing schools of thought namely, the industrial organizational theory and bid‐specific factors theory have been compared to identify which of these two theories affect the target shareholders' announcement wealth gains in India.

Design/methodology/approach

Standard event study methodology has been applied to compute the announcement returns for domestic and cross‐border acquisitions. Cross‐border effect is calculated to compare the value creation in the two sets of acquisitions. Furthermore, cross‐sectional regression analysis is conducted to capture the impact of bid‐related features on target shareholder's value creation.

Findings

The results indicate that both domestic and cross‐border acquisitions have created value for the target company shareholders on the announcement. Nonetheless, the analysis of cross‐border effect as well as regression analysis makes it evident that value creation is higher for domestic acquisitions as compared to cross‐border acquisitions due to the influence of various bid‐specific factors. Thus, in India, bid‐related variables are the fundamental drivers of the target's announcement wealth gains irrespective of the nationality of the acquirer.

Originality/value

The paper extends the discussion on the target's wealth creation in domestic and cross‐border acquisitions by segregating the existing literature into two schools of thoughts namely, the industrial organizational school and bid‐specific factors school in an emerging economy like India. Moreover, various reasons specific to Indian mergers and acquisitions have been forwarded to explain the subdued market reaction to cross‐border acquisitions.

Details

International Journal of Commerce and Management, vol. 21 no. 1
Type: Research Article
ISSN: 1056-9219

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Book part
Publication date: 18 August 2006

Günter K. Stahl, Chei Hwee Chua and Amy L. Pablo

Prior research on post-acquisition integration has paid little attention to the factors that influence the development of trust between the members of an acquiring firm…

Abstract

Prior research on post-acquisition integration has paid little attention to the factors that influence the development of trust between the members of an acquiring firm and those of the target firm. Using a policy capturing approach, we found that five aspects of the takeover situation and the integration process affect target firm members’ trust in the acquiring firm's management: takeover friendliness, national cultural similarity, interaction history of the acquiring firm and the target firm, retained autonomy, and attractiveness of the acquiring firm's HR policies. Our findings suggest that of the five trust antecedents, the attractiveness of the acquirer's HR policies is by far the most powerful predictor of target firm members’ trust in the acquiring firm's management. The implications for post-acquisition integration research and practice are discussed.

Details

Advances in Mergers and Acquisitions
Type: Book
ISBN: 978-0-76231-337-2

1 – 10 of 898