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Merger Announcements (merger + announcement)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Informed Trading around Merger Announcements: An Empirical Test Using Transaction Volume and Open Interest in Options Market

FINANCIAL REVIEW, Issue 2 2001
Narayanan Jayaraman
G14/G34 Abstract This paper provides empirical evidence on the level of trading activity in the stock options market prior to the announcement of a merger or an acquisition. Our analysis shows that there is a significant increase in the trading activity of call and put options for companies involved in a takeover prior to the rumor of an acquisition or merger. This result is robust to both the volume of option contracts traded and the open interest. The increased trading suggests that there is a significant level of informed trading in the options market prior to the announcement of a corporate event. In addition, abnormal trading activity in the options market appears to lead abnormal trading volume in the equity market. This finding supports the hypothesis that the options market plays an important role in price discovery. [source]

The Benefits of Banking Mega-Mergers: Event Study Evidence from the 1998 Failed Mega-Merger Attempts in Canada

CANADIAN JOURNAL OF ADMINISTRATIVE SCIENCES, Issue 3 2003
Ramon Baltazar
We investigate the main benefit(s) of specific banking mega-mergers, and whether or not we can infer the benefit(s) from event study evidence of stock market reactions to the mega-mergers. In addressing these questions, we examine the market's reactions to three announcements surrounding the 1998 failed mega-merger attempts in the Canadian banking industry. From our analysis, we conclude that market power,not scale, scope, or X-eficiency economies, or access to government safety net subsidies,was the primary benefit ascribed by Canadian shareholders to the merger proposals. To the extent that the market's perception of merger benefits is an accurate indicator of the merging partners' motives, we also conclude that an analysis of shareholder reactions to a merger announcement,as undertaken here,is a productive avenue for regulators attempting to discern a particular merger's main motivations. Résumé Dans cette étude, nous examinons les avantages principaux de certaines méga-fusions bancaires. Nous nous demandons s'il est possible d'inférer ces avantages à partir de l'étude des réactions du marché boursier aux méga-fusions. Notre étude s'appuie sur les réactions du marché enregistrées à la suite de trois annonces, en 1998, de tentatives de méga-fusions avortées dans l'industrie bancaire canadienne. Notre analyse débouche sur la conclusion que le pouvoir du marché,et non son échelle, son étendue, l'efficacité de son économie (économies en efficacité X) ou l'accès au filet de sécurité des subventions gouvernementales,est le principal avantage que les actionnaires canadiens évoquent pour justifier les propositions de fusion. La perception des avantages de la fusion étant un indicateur clair des motivations des partenaires de la fusion, nous pensons qu'une analyse des réactions des actionnaires à l'annonce d'une fusion est une piste pertinente dans la détermination des principales raisons qui la sous-tendent. [source]

Corporate restructurings: ripple effects on corporate philanthropy

JOURNAL OF PUBLIC AFFAIRS, Issue 1 2004
Jennifer J. Griffin
Abstract Corporate restructurings, by their very nature, are inherently disrupting. With managerial discretion potentially curtailed, the ripple effects of restructurings are likely to be widespread and long-lasting. This paper examines one ripple effect of corporate restructurings: the effects of donations from corporate philanthropic foundations after acquisitions. By extending the business strategy merger and acquisition (M&A) literature to include philanthropic activities and applying the corporate citizenship literature to an M&A context, the author creates a model and tests hypotheses. Simultaneous examination of the impacts of corporate citizenship and business strategy is warranted in today's research on corporate restructurings, since larger acquisitions are occurring more frequently, and acquisitions have the potential to adversely affect large numbers of individuals. As ever-larger firms consolidate, with record-breaking merger announcements, the potential for increased scrutiny by the media, shareholders, anti-trust officials and salient stake-holders is heightened. These findings, contrary to predictions, suggest that corporate philanthropy increases during the first year after an acquisition within the same industry. Moreover, the increase is sustained. Philanthropic donations continue to increase three years after acquisitions within the same industry. Implications for public affairs executives is examined. Copyright © 2004 Henry Stewart Publications [source]

The Impact of Bank Consolidation on Commercial Borrower Welfare

THE JOURNAL OF FINANCE, Issue 4 2005
JASON KARCESKI
ABSTRACT We estimate the impact of bank merger announcements on borrowers' stock prices for publicly traded Norwegian firms. Borrowers of target banks lose about 0.8% in equity value, while borrowers of acquiring banks earn positive abnormal returns, suggesting that borrower welfare is influenced by a strategic focus favoring acquiring borrowers. Bank mergers lead to higher relationship exit rates among borrowers of target banks. Larger merger-induced increases in relationship termination rates are associated with less negative abnormal returns, suggesting that firms with low switching costs switch banks, while similar firms with high switching costs are locked into their current relationship. [source]

Effects of Private and Public Canadian Mergers

CANADIAN JOURNAL OF ADMINISTRATIVE SCIENCES, Issue 2 2005
Ayse Yuce
Abstract This paper examines the merger announcements of Canadian companies between 1994 and 2000 during an exceptional merger boom. The results show that both the target companies and the acquirer companies obtain significant positive abnormal returns during this time period. Companies that acquire private targets with stock have positive returns; however, acquirers of private firms have significantly higher risk compared with those that acquire public targets, despite nonsignificant differences in returns. Acquirers pay significantly less to acquire private firms than public firms, especially with stock. Overall, the findings suggest there is support for a liquidity discount for private firms, and the market is efficient in valuing firms in asymmetric conditions. Résumé Dans cet article, nous examinons les annonces de fusions des compagnies canadiennes entre 1994 et 2000, période de grand boom de fusion. Les résultats montrent qu'au cours de cette période, les compagnies cibles et les compagnies acquéreuses obtiennent des rendements anormaux positifs. Les entreprises qui achètent des cibles privées avec des actions ont des rendements positifs; cependant, ces entreprises ont des risques considérablement plus élevés par rapport aux entreprises qui achètent des cibles publiques nonobstant des différences négligeables dans les rendements. Par ailleurs, les acquéreurs paient nettement moins pour acheter les entreprises privées que pour acheter les entreprises publiques, en particulier celles qui ont des actions. Dans l'ensemble, les résultats de l'étude révèlent qu'il est nécessaire d'escompter la liquidité pour les entreprises privées et que le marché permet de valoriser les entreprises dans les conditions asymétriques. [source]