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Target Firms (target + firm)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	100%

Selected Abstracts

Antecedents of Shareholder Activism in Target Firms: Evidence from a Multi-Country Study

CORPORATE GOVERNANCE, Issue 4 2010
William Q. Judge
ABSTRACT Manuscript Type: Empirical Research Question/Issue: This study seeks to better understand the antecedents of shareholder activism targeted at firms located in three common law countries (i.e., USA, UK, and Australia) and three civil law countries (Japan, Germany, and South Korea) during the 2003,07 time period. Research Findings/Insights: Our findings suggest that the antecedents of shareholder activism vary by the motivation of the activist. We demonstrate that activists target firms with two motives (a) to improve the financial performance, and (b) to improve the social performance of the firm. With respect to the target firm level antecedents, we find that firm size is unrelated to financial activism, but positively related to social activism; ownership concentration is negatively related to both financial and social activism; and prior profitability is negatively related to financial activism, but positively related to social activism. Further, these relationships in the case of financial activism are generally stronger in common law legal systems, whereas those in the case of social activism are generally stronger in environments with a greater level of income inequality. Theoretical/Academic Implications: Our findings suggest that future research should differentiate between the motivations of the activism event. Further, we find that while agency logic works well for financial activism, institutional theory provides stronger explanations for social activism. Overall, we demonstrate the complementary nature of these two theories in explaining shareholder activism. Practitioner/Policy Implications: We found that the "exposure" to shareholder activism varies by the motivation of the activist, and the nature of the firm and its national context. An understanding of these issues would help firms develop proper response strategies to activism events. [source]

The Deterring Role of the Medium of Payment in Takeover Contests: Theory and Evidence from the UK

EUROPEAN FINANCIAL MANAGEMENT, Issue 4 2000
Philippe Cornu
The deterring role of the medium of payment in a takeover contest is analysed from the point of view of the bidder. Cash, debt and equity are considered as alternative mediums of payment, and the bidder equilibrium strategies are specified following the Perfect Bayesian Equilibrium requirements for a signalling game. The model predicts notably that cash offers signal a high-valuing bidder, strongly determined to acquire the target firm. Moreover, cash offers deter competition better than debt or equity offers. The theoretical results are validated with data from the UK over 1995,96. [source]

The Information Content of Method of Payment in Mergers: Evidence from Real Estate Investment Trusts (REITs)

REAL ESTATE ECONOMICS, Issue 3 2001
Robert D. Campbell
We provide evidence on the information content of the method of payment in mergers by examining shareholder returns in a sample of REIT mergers over the period 1994,1998. When the target firm is publicly held, we find that transactions are always stock-financed, and that acquiring firm shareholders sustain small negative returns around the announcement date. When the target is privately held, cash financing, mixed (stock and cash) financing, and placement of blocks of acquirer stock with target owners are more prevalent. Acquirer returns are positive in stock-financed mergers when the target is private, which is consistent with both the information signaling and monitoring by blockholders hypotheses. Further analysis supports the information signaling hypothesis as the dominant explanation. The effects of other explanatory variables are similar whether the target is public or private. Most significantly, acquiring shareholder returns are negatively related to the acquirer's size, but positively related to the acquirer's use of the UPREIT organizational structure. The positive wealth effects of the UPREIT structure are not fully explained as the capitalization of tax benefits. [source]

A Theory of Consumer Boycotts under Symmetric Information and Imperfect Competition,

THE ECONOMIC JOURNAL, Issue 511 2006
Robert Innes
This article models strategic interactions between non-identical duopolistic firms and a public interest/environmental organisation (EO) that promotes ,green' production practices by threatening consumer boycotts against ,brown' producers. The article describes when boycotts are deterred by prior firm commitments to be ,green' and, also when a boycott arises in equilibrium, despite symmetric information. When a boycott arises, it is either a small persistent boycott against the ,small firm' in the industry, or a large transitory boycott against the ,large firm' in the industry that prompts the target firm to accede to the boycott demands quickly. [source]

Competition For Board Seats Following Stock-For-Stock Mergers

THE JOURNAL OF FINANCIAL RESEARCH, Issue 1 2004
Wallace N. Davidson III
Abstract We examine the board structure of firms following stock-for-stock mergers. We find that former target inside (outside) directors are more likely to join the combined firm board when target insiders (outsiders) have a relatively strong position on the pre-merger target board. The relative size of the target firm, target firm profitability, and target blockholder ownership also influence whether target directors join the combined board. We conclude that competition for board seats on the combined board is won by target directors with greater bargaining positions. [source]

Shareholder Wealth Effects of European Domestic and Cross-border Takeover Bids

EUROPEAN FINANCIAL MANAGEMENT, Issue 1 2004
Marc Goergen
G32; G34 Abstract This paper analyses the short-term wealth effects of large intra-European takeover bids. We find announcement effects of 9% for the target firms compared to a statistically significant announcement effect of only 0.7% for the bidders. The type of takeover bid has a large impact on the short-term wealth effects with hostile takeovers triggering substantially larger price reactions than friendly operations. When a UK firm is involved, the abnormal returns are higher than those of bids involving both a Continental European target and bidder. There is strong evidence that the means of payment in an offer has an impact on the share price. A high market-to-book ratio of the target leads to a higher bid premium, but triggers a negative price reaction for the bidding firm. We also investigate whether the predominant reason for takeovers is synergies, agency problems or managerial hubris. Our results suggest that synergies are the prime motivation for bids and that targets and bidders share the wealth gains. [source]

Private equity bids in Australia: an exploratory study

ACCOUNTING & FINANCE, Issue 1 2010
Larelle Chapple
G34 Abstract In this study, we provide an insight into how private equity players choose their targets and the bid arrangements they prefer. We test our expectations of the unique features of private equity targets using a sample of 23 listed private equity target firms during 2001,2007. We find, relative to a benchmark sample of 81 corporate targets matched by year and industry, the private equity target firms to be larger, more profitable, use their assets more efficiently, more highly levered and have greater cash flow. Multivariate testing indicates that private equity targets have relatively greater financial slack, greater financial stability, greater free cash flow and lower measurable growth prospects. All conclusions are found to be robust to a control sample of 502 takeover bids during 2001,2007. [source]

R&D investment as a signal in corporate takeovers

MANAGERIAL AND DECISION ECONOMICS, Issue 5 2009
M. Pilar Socorro
The purpose of this paper is to analyze the effects that takeover threats have on firms' preacquisition R&D intensity. Critics of takeovers usually argue that takeover threats may reduce target firms' R&D investments. However, I find that target firms may increase R&D investment in order to signal their compatibility with the acquiring firm. The identity of the acquired firm depends on the market size and target firms' efficiency and compatibility. Through R&D investments, target firms may affect this result, signaling potential outsiders the kind of competition they may face, and forcing them to accept lower takeover offers. Copyright © 2009 John Wiley & Sons, Ltd. [source]

MARKET REACTIONS TO THE PASSAGE OF THE FINANCIAL HOLDING COMPANY ACT IN TAIWAN

PACIFIC ECONOMIC REVIEW, Issue 4 2008
Jane-Sue Wang
Abstract. We examine how financial institutions react to various events surrounding the passage of Taiwan's Financial Holding Company Act in June 2001. Empirical results indicate that the financial system experiences significant abnormal returns along the legislative process. Smaller firms have significantly higher abnormal returns, thus lending no support for the hypothesis that larger firms benefit more from the Act. Further analysis shows that the significance of market value is replaced by a significant securities industry effect, thereby consistent with the observation that Taiwan's securities firms are generally smaller in market values and are potential target firms for financial holding companies. [source]

Are Friendly Acquisitions Too Bad for Shareholders and Managers?

BRITISH JOURNAL OF MANAGEMENT, Issue S1 2006
Friendly Acquirers, Long-Term Value Creation, Top Management Turnover in Hostile
The well-documented failure of the majority of acquisitions to create value is often identified in popular discussion with hostile acquisitions, whereas friendly acquirers seem to get a friendly press. The relative performance of friendly and hostile acquirers therefore warrants a rigorous empirical investigation. Clear evidence of superior value creation in hostile over friendly acquisitions allows us to judge the efficacy of the market for corporate control. In this article we examine the long-term shareholder wealth performance of four types of acquirers , friendly bidder, hostile bidder, white knight and hostile bidder facing a white knight or another hostile bidder. For a sample of 519 acquisitions of UK target firms during 1983,1995, we estimated the three-year post-acquisition gains to acquirer shareholders and found that hostile acquirers deliver significantly higher shareholder value than friendly acquirers. We found that friendly acquirers with high stock-market ratings destroyed more value than hostile acquirers with a similar rating. Friendly acquirer top managers suffered greater job losses than those of hostile acquirers, perhaps paying the price for their inferior value-creation performance. Our study provides evidence of the superior value-creation performance of hostile acquirers and makes the case against takeover regulatory rules that may impede hostile takeovers. [source]