Taxation of shareholder capital gains and the choice of payment method in takeovers

From December 1999, shareholders who disposed of shares in Australian takeovers in exchange for scrip could elect to defer capital gains taxation until the disposal of the shares received. We investigate payment method choice by acquiring firms before and after this regulatory change to assess whether target shareholder capital gains tax liabilities became an important factor considered in choosing the form of payment. The results show that, subsequent to the regulatory change, there is a significantly higher probability that equity will be offered as consideration where target shareholder capital gains are greater. This finding confirms the importance of shareholder level taxation in explaining corporate acquisition structure and adds to previous European and US evidence on factors associated with payment method choice in takeovers.     

Investigating the valuation effects of reverse takeovers: evidence from Europe

This study examines a European sample of 222 private firms that opted for going public through a reverse takeover transaction during the period 1992–2011. In particular, our study investigates whether reverse takeovers announcements are value-increasing transactions, especially in countries that follow strong governance structures. Moreover, the post-reverse takeover stock price and operating performance is also at the epicenter of the current study. Employing the classical event study methodology, we document significant wealth gains for the shareholders of public firms involved in reverse takeovers. The market reaction is stronger when stricter corporate governance structures prevail in the countries where public firms trade. However, the short-term gains seem to revert to substantial losses over the long-term lending support to the overreaction phenomenon. We further detect negligible improvement in the post-reverse takeover financial performance of the new entity raising further concerns over the efficacy of such transactions.     

The dynamics of the free-rider problem in takeovers

We explore the dynamics of a takeover bid. In contrast to precedingmodels, if the initial takeover bid is unsuccessful a raideris allowed to make a new tender offer in order to try and securethe remaining shares. Numerical analysis shows that the raider'stender offer rises over time as be accumulates more shares.The anticipation of a higher tender offer in the future makesshareholders more inclined to hold their shares and forces theraider to offer a higher premium than is predicted by statictheories. As the time between tender offers goes to zero, weshow analytically that the expected profit from engaging ina takeover goes to zero.     

The effect of takeovers on the fundamental value of acquirers

This paper develops a new methodology to examine the financial impact of acquisitions, designed to address whether takeovers yield a positive net present value for the acquiring company. Specifically, we employ the residual income valuation method to compare the fundamental value of the acquiring company before acquisition with the fundamental value after acquisition.We apply this methodology to 303 UK acquisitions completed during 1985–1996, and compare the results with the effects of takeover on profitability and short‐ and long‐run share returns. We find that the impact of acquisition on fundamental value is slightly negative but statistically insignificant. This result differs from the effect of takeover on profitability, which is significantly positive, and the effect of takeover on share returns, which is significantly negative.     

Competition and the medium of exchange in takeovers

The role of the medium of exchange in competition among biddersand its effect on returns to stockholders in corporate takeoversare investigated. Consistent with recent empirical evidence,our model shows that stockholders of both acquiring and targetfirms obtain higher returns when a takeover is financed withcash rather than equity, and that returns to target shareholdersincrease with competition. The model predicts that the factionof synergy captured by the target decreases with the level ofsynergy. Finally, it is shown that, as competition increases,the case component of the offer as well as the proportion ofcase offered increases.     

Industry structure and horizontal takeovers: Analysis of wealth effects on rivals,suppliers, and corporate customers

We examine the wealth effects of horizontal takeovers on rivals of the merging firms, and on firms in the takeover industry's supplier and customer industries. Inconsistent with the collusion and buyer power motives, we find significant positive abnormal returns to rivals, suppliers, and corporate customers for the subsample of takeovers with positive combined wealth effect to target and bidder shareholders. Overall, our findings suggest that the average takeover in our sample is driven by efficiency considerations. However, we find evidence suggesting that horizontal takeovers increase the buyer power of the merging firms if suppliers are concentrated.     

A law and finance theory of strategic blocking and preemptive bidding in takeovers

This paper uses a law and finance approach to develop a new takeover theory that formalizes the idea that large target shareholders, who can block a takeover attempt, exercise a strategic influence on tender offer prices, and thereby, on the distribution of the takeover gain. The theory captures the interaction between legal rules, target ownership structure, bidder toehold and potential effects of arbitrageurs in an endogenously determined bargaining parameter that predicts a skewed distribution of the gain in favor of target shareholders. In a regression model, the parameter has significant explanatory power, specifically when the total takeover gain is positive.     

A dynamic systems perspective on fine art and its market

This article focuses on dynamic systems theory applied to art systems, especially the social system of art. By this integrative approach, the field of art and culture can be linked to, as well as profit from, other fields where systems-theoretical approaches have been influential, such as sociology, psychology, communication theory and the natural sciences. We show that systems models help to describe and conceptualize essential phenomena characteristic of the fine arts, such as pattern formation, reduction of complexity, and self-reference. Pattern formation can be observed in emerging artistic styles, fashions and trends. The property of self-reference becomes tractable by using the concept of endosystems, i.e. systems that include participating observers and second circularity feedback. The consequences of such dynamics are uncertainty, destabilization, and diversification. Endosystemic modeling promises to capture core properties not only of contemporary art, laying an emphasis on novelty and self-reference. Endosystems are appropriate models of further social systems, especially markets systems, which pose problems for foresight. Within the horizon of foresight that is at all possible in endosystems, three futures scenarios are worked out for the art system.     

The process of measurement in managerial accounting: A psycho-technical systems perspective

This paper develops a formal framework of the act or process of measurement in managerial accounting. Although the traditional paradigm of measurement underlying accounting treats it as a technology designed to represent properties of events and transactions in numerical terms, this paper is based on the notion that managerial accounting measurement is intended to facilitate behavior, and thus requires an alternative view of measurement as a “psycho-technical system”. The paper presents the psycho-technical framework and examines its application in selected areas of managerial accounting: human resource accounting, social accounting, divisional performance evaluation, zero-based budgeting, standard costing, and evaluation of internal control systems.     

上市公司财务参数与其股价波动性关系探究

本文探究了上市公司年度股价波动性与其上一年公开财务指标的相关关系。公开财务指标主要包括六项,从不同维度反映了公司规模、资本结构、偿债能力、盈利状况、管理状况和股东情况。通过分析结果发现,若干财务指标与上市公司的股价波动性都有显著的相关关系,大部分符合预期及常识。有一些财务指标与上市公司的股价波动性长时期内表现出稳定、显著的关系。文中尝试探讨了造成这种相关性的因素。     

投资者的选择与基金溢出效应研究

本文着重研究基金家族中明星基金对家族内部基金的溢出效应,即明星基金对基金资金流入增长率的影响。对中国证券市场54家基金家族管理的281只开放式偏股型基金的面板分析发现,拥有明星基金能够显著提高基金家族的新基金流入的增长比例,但拥有垃圾基金并不能显著地减少;明星基金比非明星基金能给自身吸引来更多的新资金,明星基金家族的非明星基金与非明星家族的基金相比没能被笼罩在这样的优质光环下。     

The consequences of earnings management for the acquisition premium in friendly takeovers

This study investigates the effect of earnings management (EM) on deal premiums in friendly takeovers. It examines both accruals and real EM in the year preceding the deal announcement, based on a sample of 578 European firms subject to an acquisition or acquisition attempt between 2005 and 2015. The empirical findings suggest that downward EM is associated with a higher premium offered by the acquirer. The results suggest that income-decreasing accounting choices could be a negotiated strategy between the acquirer and target firms’ managers to clean the balance sheet, reduce the likelihood of litigation, and create a fictive performance through an accrual reversal post-acquisition.     

Macroeconomic effects of corporate default crisis: A long-term perspective

Using an extensive data set on corporate bond defaults in the US from 1866 to 2010, we study the macroeconomic effects of bond market crises and contrast them with those resulting from banking crises. During the past 150 years, the US has experienced many severe corporate default crises in which 20–50% of all corporate bonds defaulted. Although the total par amount of corporate bonds has at times rivaled the amount of bank loans outstanding, we find that corporate default crises have far fewer real effects than do banking crises. These results provide empirical support for current theories that emphasize the unique role that banks and the credit and collateral channels play in amplifying macroeconomic shocks.     

The evidence of bidders' overpayment in takeovers: the valuation ratios approach

Empirically, bidder returns at the time of takeover announcements are negative. This paper investigates the relation between bidder returns and overpayment in mergers and tender offers while controlling for other potentially important factors. Unlike other studies, the paper measures overpayment using two valuation ratios: earnings-price ratio and book-to-market ratio. Results show these ratios are important in explaining negative bidder returns. The paper also finds that the payment method in mergers and tender offers produces an information effect.     

Linear versus process tracing approaches to judgment modelling: A new perspective on cue importance

For a bankruptcy prediction problem, the judgment formation process is studied using linear models and process tracing models. The linear models are constructed using traditional linear discriminant analysis techniques. The process tracing models are constructed using computer-generated algorithmically-based decision nets. All the models presented show good predictive accuracy. However, the linear models and process tracing models diverge widely on several measures of cue importance. This divergence, for a fairly straightforward problem, is intriguing since virtually all the evidence in the accounting literature about cue importance is based on linear models research. The importance of different information cues to decision-makers is clearly a critical issue in the design of effective accounting information systems. Thus, this study suggests the need for much more careful attention to the complex question of assessing cue importance.     

Asymmetric information and the medium of exchange in takeovers: theory and tests

In a model of takeovers under asymmetric information, we identifya separating equilibrium in which the value of the bidder firmis revealed by the mix of cash and securities used as paymentfor the target. The model predicts that the revealed biddervalue is monotonically increasing and convex in the fractionof the total offer that consists of cash. We examine the modelrestrictions using data from Canada, where mixed offers areboth relatively frequent and free of the confounding tax-relatedoptions characterizing mixed offers in the United States. Wefind that the average announcement-month bidder abnormal returnin mixed offers is large and significant. However, maximum likelihoodestimates of parameters in both linear and nonlinear cross-sectionalregressions fail to support the model predictions.     

Do targets grab the cash in takeovers: The role of earnings management

Extant research on Mergers and Acquisitions (M&A) provides evidence that acquirers underperform subsequent to the takeover completion. Such evidence is more unequivocal for acquirers that finance the acquisition by issuing equity relative to those that use cash. Current literature recognizes various reasons for this underperformance, most of which suggest overvaluation of the acquirers and/or overpayment for the targets at the time of acquisition announcement. Alternatively, this paper aims to investigate whether acquirers' post-takeover abnormal return is also attributed to target firms' real and/or accrual earnings management. Our results indicate that, on average, targets manage earnings upwards using real transactions rather than accruals, during the year preceding the takeover. More specifically, we find evidence of earnings management through sales among targets of cash acquisitions and that it is significantly and negatively related to the post-acquisition performance of the acquirers. These findings suggest that there is an association between the method of financing in acquisitions and earnings management in target firms, which could impact the post-takeover performance of acquirers.     

The determinants and valuation effects of classification choice on the statement of cash flows

In this paper we exploit the choice allowed by International Financial Reporting Standards (IFRS) regarding the presentation of interest payments on the cash flow statement to answer two related questions: First, whether the classification choice is explained by firm reporting incentives and second, whether it is value relevant. Using a UK sample, we find that firms reporting losses, with a greater proportion of their debt stemming from public sources, with CFO-based covenants and greater increases in leverage in the year of adoption are less likely to report interest payments in cash flows from operating activities (CFOA). Results also suggest that the incentive to meet or beat analyst CFO forecasts decreases, but strong corporate governance increases the probability of including interest payments in CFOA. Based on the assumption that the decision not to classify interest payments in CFOA captures lower disclosure quality or poor future expected performance, we posit that these firms should also exhibit lower valuations. Results obtained after correcting for self-selection bias confirm this assertion. We conclude that managers’ decision not to classify interest payments in CFOA is consistent with the opportunistic use of the choice allowed by IFRS.     

A dynamic perspective on the determinants of accounts payable

Companies can use supplier financing as a source of short-term finance. The main objective of this paper is to extend the literature on the determinants of accounts payable and to test whether the accounts payable follow a model of partial adjustment. To do this, we use a sample of 3,589 small and medium sized firms in the UK. Using a dynamic panel data model and employing GMM method of estimation we control for unobservable heterogeneity and for potential endogeneity problems. The results reveal that firms have a target level of accounts payable. In addition, we find that larger firms, with better access to alternative internal and external financing and with a lower cost, use less credit from suppliers. Moreover, firms with higher growth opportunities use more trade credit for financing sales growth.