Stock Market Reactions to Financing and Payment Decisions for European Mergers and Acquisitions

• Autorzy: Wolfgang Bessler , David Kruizenga , Wim Westerman
• Języki publikacji: EN

Abstrakty

EN

Aim: We analyze stock market reactions to merger and acquisition announcements for firms in Europe and contribute to the literature by providing empirical evidence how the decisions with respect to alternative financing sources (equity or debt) and methods of payment (cash or stock) affect the magnitude of the valuation effects. Research design: An event study methodology is applied to 717 M&A transactions. We analyze the size of the cumulative abnormal returns using the financing sources and payment methods and other variables as the relevant determinants. Findings: The cumulative abnormal results suggest that target shareholders and bidder shareholders in private deals benefit from mergers and acquisitions. The effect found is centered around the announcement date, making our findings consistent with market efficiency. Debt financed deals outperform equity financed deals and cash paid M&A outperform stock paid M&As due to information asymmetries as well as signaling and agency effects. Originality: This study adds to our understanding of the relevance of the financing sources and the payment methods for the magnitude of valuation effects of mergers and acquisitions in Europe. Implications: This study may help practitioners to better assess the valuation effects of alternative financing sources and payment methods when acquiring other firms.(original abstract)

Słowa kluczowe

PL

Fuzje i przejęcia; Metody płatności; Źródła finansowania

EN

Mergers and acquisitions; Methods of payment; Source of financing

• Czasopismo: Central European Review of Economics and Management
• Rocznik: 2020
• Tom: 4
• Numer: nr 2 Contemporary Issues of Behavioral Research in Business, Economics and Finance
• Strony: 41-89

Twórcy

autor

Wolfgang Bessler

• University of Hamburg, Germany ; University of Groningen, The Netherlands

autor

David Kruizenga

• University of Groningen, The Netherlands

autor

Wim Westerman

• University of Groningen, The Netherlands

Bibliografia

• Alexandris G., Petmezas D., Travlos N.G. (2010), Gains from mergers and acquisitions around the world. New evidence, "Journal of Financial Management", vol. 39 no. 4, pp. 1671-1695.
• Alexandridis G., Mavrovitis Ch.F., Travlos N.G. (2012), How have M&As changed? Evidence from the sixth merger wave, "European Journal of Finance", vol. 18 no. 8, pp. 663-688.
• Alexandridis G., Fuller K.P., Terhaar L., Travlos N.G. (2013), Deal size, acquisition premia and shareholder gains, "Journal of Corporate Finance", vol. 20 no. 1, pp. 1-13.
• Alexandridis G., Antypas N., Travlos N.G. (2017), Value creation from M&As. New evidence, "Journal of Corporate Finance", vol. 45C, pp. 632-650.
• Andrade G., Mitchell M., Stafford E. (2001), New evidence and perspectives on mergers, "Journal of Economic Perspectives", vol. 15 no. 2, pp. 103-120.
• Asquith P. (1983), Merger bids, uncertainty, and stockholder returns, "Journal of Financial Economics", vol. 11 no. 1-4, pp. 51-83.
• Ball R. (1978), Anomalies in relationships between securities' yields and yield-surrogates, "Journal of Financial Economics", vol. 6 no. 2-3, pp. 103-126.
• Bessler W., Drobetz W., Pensa P. (2008), Do managers adjust the capital structure to market value changes. Evidence from Europe, "Zeitschrift für Betriebswirtschaft", Special Issue: 50 Years after Modigliani & Miller: recent developments in corporate finance, no. 6, pp. 113-145.
• Bessler W., Drobetz W., Kazemieh R. (2011), Factors affecting capital structure decisions, in: Capital structure and corporate financing decisions, Baker K., Martin J. (eds.), Kolb Series in Finance, John Wiley & Sons, New York, pp. 17-40.
• Bessler W., Drobetz W., Grüninger M.C. (2011), Information asymmetry and financing decisions, International Review of Finance 11, 123-154.
• Bessler, W., Drobetz, W., Zimmermann, J. (2011), Capital structure and corporate financing decisions: Valuation, strategy and risk analysis. in: K. Baker and J. Martin (editors): Capital Structure and Corporate Financing Decisions, John Wiley & Sons, New York, 2011, 419-444.
• Bessler W., Schneck C. (2015), Excess Premium Offers and Bidder Success in European Takeovers, Eurasian Economic Review, 23-62.
• Bessler W., Schneck C., Zimmermann J. (2015), Bidder contests in international mergers and acquisitions: The impact of toeholds, preemptive bidding, and termination fees, "International Review of Financial Analysis", vol. 42, pp. 4-23.
• Bessler W., Schneck C., Zimmermann J. (2017), Growth strategies of initial public offerings in Europe, Working Paper, University of Giessen.
• Bharadwaj A., Shivdasani A. (2003), Valuation effects of bank financing in acquisitions, "Journal of Financial Economics", vol. 67 no. 1, pp. 113-148.
• Brown S., Warner J. (1980), Measuring security price performance, "Journal of Financial Economics", vol. 8 no. 3, pp. 205-258.
• Brown S., Warner J. (1985), Using daily stock returns. The case of event studies, "Journal of Financial Economics", vol. 14, pp. 3-31.
• Cho H., Ahn H.S. (2017), Stock payment and the effects of institutional and cultural differences. A study of shareholder value creation in cross-border M&As, "International Business Review", vol. 26 no. 3, pp. 461-475.
• Cornaggia J., Li J.Y. (2019), The value of access to finance. Evidence from M&As, "Journal of Financial Economics", vol. 131 no. 1, pp. 232-250.
• Dutta S., Saadi S., Zhu P.C. (2013), Does payment method matter in cross-border acquisitions?, "International Review of Economics and Finance", vol. 25, pp. 91-107.
• Faccio M., Masulis R. (2005), The choice of payment method in European mergers and acquisitions, "Journal of Finance", vol. 60, pp. 1345-1388.
• Fama E. (1965), The behavior of stock market prices, "Journal of Business", vol. 38 no. 1, 34-105.
• Fama E. (1970), Efficient capital markets. A review of theory and empirical work, "Journal of Finance", vol. 25 no. 2, pp. 383-417.
• Fama E. (1991), Efficient capital markets II, "Journal of Finance", vol. 46 no. 5, pp. 1575-1617.
• Fich E.M., Nguyen T., Officer M. (2018), Large wealth creation in mergers and acquisitions, "Financial Management", vol. 47 no. 4, pp. 953-991.
• Fischer M. (2017), The source of financing mergers and acquisitions, "Quarterly Review of Economics and Finance", vol. 65C, pp. 227-239.
• Fuller K., Netter J., Stegemoller M. (2002), What do returns to acquiring firms tell us? Evidence from firms that make many acquisitions, "Journal of Finance", vol. 57 no. 4, pp. 1763-1793.
• Golubov A., Petmezas D., Travlos N.G. (2016), Do stock-financed acquisitions destroy value? New methods and evidence, "Review of Finance", vol. 20, pp. 161-200.
• Goergen M., Renneboog L. (2004), Shareholder wealth effects of European domestic and cross-border takeover bids, "European Financial Management", vol. 10 no. 1, pp. 9-45.
• Grossman S., Stiglitz J. (1980), On the impossibility of informationally efficient markets, "American Economic Review", vol. 70 no. 3, 393-408.
• Harford J., Klasa S., Walcott N. (2006), Do firms have leverage targets? Evidence from acquisitions, "Journal of Financial Economics", vol. 93 no. 1, pp. 1-14.
• Huang P., Officer M., Powell R. (2016), Method of payment and risk mitigation in cross-border mergers and acquisitions, "Journal of Corporate Finance", vol. 40, pp. 216-234.
• Huber P. (1967), The behavior of maximum likelihood estimated under nonstandard conditions, Proceedings of the Fifth Berkeley Symposium on Mathematical Statistics and Probability 1, pp. 221-233.
• Ismael A., Krause A. (2010), Determinants of the method of payment in mergers and acquisitions, "Quarterly Review of Economics and Finance", vol. 50, pp. 471-484.
• Jensen M., Meckling W. (1976), Theory of the firm. Managerial behavior, agency costs and ownership structure, "Journal of Financial Economics", vol. 3 no. 4, pp. 305-360.
• Jensen M., Ruback R. (1983), The market for corporate control. The scientific evidence, "Journal of Financial Economics", vol. 11, pp. 5-50.
• Kahle K., Walkling R. (1996), The impact of industry classifications on financial research, "Journal of Financial and Quantitative Analysis", vol. 31 no. 3, pp. 309-355.
• La Porta R., Lopez-de-Silanes F., Scheiffer A., Vishny R. (1998), Law and finance, "Journal of Political Economics", vol. 106, pp. 1113-1147.
• Lapron L., Shen J.C. (2007), Acquisitions of private vs. public firms. Private information, target selection, and acquirer returns, "Strategic Management Journal", vol. 28 no. 9, pp. 891-911.
• Lie E., Liu Y. (2018), Corporate cash holdings and acquisitions, "Financial Management", vol. 47 no. 1, pp. 159-173.
• Luypaert M., Van Caneghem T. (2017), Exploring the double-sided effect of information asymmetry and uncertainty in mergers and acquisition, "Financial Management", vol. 46 no. 4, pp. 873-917.
• MacKinlay C. (1997), Event studies in economics and finance, "Journal of Economic Literature", vol. 35, pp. 13-39.
• Maiti J., Pradhan V. (2009), Bias reduction and a solution for separation of logistic regression with missing covariates, "Biometrics", vol. 65 no. 4, pp. 1262-1269.
• Majluf N., Myers S. (1984), Corporate financing and investment decisions when firms have information that investors do not have, "Journal of Financial Economics", vol. 13, pp. 187-221.
• Markowitz H. (1952), Portfolio selection, "Journal of Finance", vol. 7 no. 1, pp. 77-91.
• Malmendier U., Moretti E., Peters F.S. (2018), Winning by losing. Evidence on the long-run effects of mergers, "Review of Financial Studies", vol. 31 no. 8, pp. 3212-3264.
• Martynova M., Renneboog L. (2009), What determines the financing decision in corporate takeovers. Cost of capital, agency problems, or the means payment?, "Journal of Corporate Finance", vol. 15 no. 3, pp. 1-42.
• Mateev M. (2017), Is the M&A announcement effect different across Europe? More evidences from continental Europe and the UK, "Research in International Business and Finance", vol. 40, pp. 190-216.
• Mitchell M., Mulherin J. (1996), The impact of industry shocks on takeover and restructuring activity, "Journal of Financial Economics", vol. 41, 193-229.
• Miller M.H., Modigliani F. (1961), Dividend policy, growth and the valuation of shares, "The Journal of Business", vol. 34 no. 4, pp. 411-433.
• Modigliani F., Miller M.H. (1958), The cost of capital, corporation finance and the theory of investment, "American Economic Review", vol. 48 no. 3, pp. 261-297.
• Moeller S., Schlingemann F., Stulz R. (2005), Wealth destruction on a massive scale? A study of acquiring-firm returns in the recent merger wave, "Journal of Finance", vol. 60 no. 2, pp. 757-782.
• Myers S. (1977), Determinants of corporate borrowing, "Journal of Financial Economics", vol. 5 no. 2, pp. 147-175.
• Peng H., Officer M.C., Powell R. (2016), Method of payment and risk mitigation in cross-border mergers and acquisitions, "Journal of Corporate Finance", vol. 40, pp. 216-234.
• Potter D. (2005), A permutation test for inference in logistic regression with small- and moderate-sized data sets, "Statistics in Medicine", vol. 24 no. 5, pp. 693-708.
• Rasch D., Teuscher F., Guiard V. (2007), How robust are tests for two independent samples?, "Journal of Statistical Planning and Inference", vol. 137 no. 8, pp. 2706-2720. Roll R. (1986), The hubris hypothesis of corporate takeovers, "Journal of Business", vol. 59 no. 2, pp. 197-216.
• Samer A., Barbopoulos L.G. (2018), The valuation effects of investor attention in stock-financed acquisitions, "Journal of Empirical Finance", vol. 45, pp. 108-125.
• Sankar B., Bijay P. (2018), Payment methods in mergers and acquisitions. A theoretical framework, "International Journal of Accounting and Financial Reporting", vol. 8 no. 1, pp. 171-187.
• Scholes M., Williams J. (1977), Estimating betas from nonsynchronous data, "Journal of Financial Economics", vol. 5 no. 3, pp. 309-327.
• Sharpe F. (1964), Capital asset prices. A theory of market equilibrium under conditions of risk, "Journal of Finance", vol. 19 no. 3, pp. 425-442.
• Slovin M.B., Sushka M.E., Polonchek J.A. (1993), The value of bank durability. Borrowers as bank stakeholders, "Journal of Finance", vol. 48 no. 1, pp. 247-266.
• Spence M. (1973), Job market signaling, "Quarterly Journal of Economics", vol. 87 no. 3, pp. 355-374.
• Vermaelen T., Xu M. (2014), Acquisition finance and market timing, "Journal of Corporate Finance", vol. 25, pp. 73-91.
• Welch B. (1947), The generalization of student's problem when several different population variances are involved, "Biometrika", vol. 34, no. 1-2, pp. 28-35.
• White H. (1980), A heteroskedasticity-consistent covariance matrix estimator and direct test for heteroskedasticity, "Econometrica", vol. 48 no. 4, pp. 817-838.
• Xu E.Q. (2017), Cross-border merger waves, "Journal of Corporate Finance", vol. 46 no. C, pp. 207-231.

Identyfikatory

DOI

10.29015/cerem.866