Determinants of premiums paid in bank acquisitions

Summary and Conclusions Mergers are a relatively observable form of business behavior and reflect a major business decision. As such, mergers provide an attractive opportunity for empirical investigation into business behavior, which may shed light on business motivation. This study tests for the determinants of premiums paid in 1,835 of the 2,717 bank mergers and acquisitions that occurred from 1973–83.The only variables that are often statistically significant and carry consistent sights are: (1) growth of the target firm; (2) growth of the target market; and (3) the capital-to-assets ratio of the target firm. The signs on these variables suggest that high growth of the target firm and its market and a low capital-to-assets ratio are particularly attractive to bank managers, for which they are willing to pay a premium. Variables which provide a relatively direct indication of profit opportunities are often not statistically significant or carry mixed signs.Overall, the results suggest that, among the set of banks that are actually acquired, growth of the target bank and its market will induce bank managers to pay a premium but profits of the target do not elicit a premium.The views expressed herein are the author's and do not necessarily reflect the views of the Board or its staff.     

Do all networks facilitate international commerce? US law firms and the international market for corporate control

This paper estimates the effects of several American law firms' international networks of offices on the total value of overseas mergers and acquisitions (M&A) by US corporations. Nowadays many nations can review proposed mergers and US law firms help clients overcome such regulatory hurdles, effectively greasing the market for corporate control. However, they can also oppose transactions that are inimical to their clients' interests. I present evidence that suggests that Baker & McKenzie—the US law firm with the most overseas offices—has facilitated such transactions, whereas the combined effect of the next five largest American law firms has tended to reduce such M&A. J. Japanese Int. Economies 17 (4) (2003) 520–537.     

COMPETITIVE ISSUES IN THE TAIWANESE BANKING INDUSTRY: MERGERS AND UNIVERSAL BANKS

This paper investigates scale economies and scope economies in the Taiwanese banking system, looking beyond the market‐power (MP) and efficient‐structure (ES) hypotheses. Given the existence of overall economies of scale and the positive value of expansion path sub‐additivity, we conclude that there might be large increases in profits following mergers. Moreover, since the profit‐structure relationship after financial reform is determined by the relative‐market‐power hypothesis, this consolidation trend will not necessarily decrease the social benefit for Taiwanese consumers. With regard to scope economies and product‐specific economies of scale, we are unable to recommend whether Taiwanese banks should develop as specialized banks or diversified banks in the future. Finally, we find that risk indicators play an important role in explaining the observed variation in bank profitability, and present evidence that default risk and leverage risk have negative effects on the profits of banking, although the effect of portfolio risk is uncertain.     

负债企业并购的时机与条件及在国企产权转让中的应用

应用实物期权博弈理论和方法研究在随机市场环境下，目标企业存在财务杠杆情形下，企业并购的时间和条件。研究表明，目标企业支付的息票越高，目标企业所在行业的波动率越低，行业的成长性越低，目标企业的最优保证金率越低。目标企业支付的息票越高，负债率高，将加速被并购。波动率延迟了并购。模型可应用于国有企业的产权转让，表明国有企业产权是可以定价的，依据是企业本身的价值，包括由现有的资产经营所产生的现金流现值和转让期权。价格的高低取决于所在行业的特征，市场的税率，并购者的期望，负债率等。根据前面的分析，国有企业所在行业的成长性越高，波动率越大，市场的税率越低，并购者的期望越高，产权转让市场越活跃，企业的负债率越低，国有企业产权转让的价格越高。通过公开拍卖是产权转让定价的最佳方式。     

公司资本结构与控制权转移价格的实证研究

文章以我国A股市场2001—2003年发生控制权协议转让的上市公司为样本,对控制权转让价格及溢价率的影响因素进行了实证分析和检验,重点分析资本结构的影响。回归结果表明:目标公司的每股净资产越高,控制权转让价格越高;股权性质影响控制权转让价格,法人股转让价格高于国有股;其     

Stackelberg横向兼并博弈的分析

文章通过增加"蛇吞象"式兼并分析,扩展了Steffen-Kai-Wieland模型,研究结果表明:无论"大鱼吃小鱼","蛇吞象","强强联合",还是"弱者联合"的兼并,四种兼并对参与企业都是有利可图的.但这些兼并都会提高市场集中度,导致消费者福利下降.     

THE ECONOMICS OF IMPORT PARITY PRICING: A PEDAGOGICAL NOTE

This paper demonstrates that pricing to import parity is not necessarily prima facie evidence of the exercise of market power. It is shown that in the presence of imports both market structures, perfect competition and monopoly, can price to import parity. If markets can be segmented enabling the firm to discriminate between the export and domestic market it is shown that the imperfectly competitive firm can differentially price. Furthermore, as the number of domestic firms is increased, and if these firms are able to segment the market, the differential between domestic and foreign prices is reduced. The import parity price may or may not be charged in the domestic market. A measure of the exercise of market power is therefore the differential between export parity and the domestic price.     

Cross‐border Mergers and Acquisitions and Financial Development: Evidence from Emerging Asia

This paper examines the relationship between cross‐border mergers and acquisitions (M&A) and financial development in emerging Asian economies. Bilateral cross‐border M&A data for nine emerging Asian economies covering 2000–2009 are analyzed with a sample selection model and a panel data model. The estimation results show that although the banking sector still plays a crucial role in facilitating cross‐border M&A, the role of equity markets has increased in importance because, in addition to cash, the issuance of common stock and the exchange of stocks have become popular forms of payment for M&A deals. Because of the relatively thin market, the primary corporate bond market plays a limited role in supporting cross‐border M&A, which is in contrast to the primary public bond market. However, for the secondary market, the corporate bond market is more effective in facilitating cross‐border M&A. The results also show that financial development in terms of stock and bond markets in their home countries tends to become more important when the target firms reside in more developed countries. In addition to financial development, the paper shows that most cross‐border M&A are invested in technology‐related and resource‐based industries while cheap labor industries are relatively less attractive.     

A Portion of Profits to Charity: Corporate Social Responsibility and Firm Profitability

I develop a model in which a firm can choose to donate a portion of its profits to the provision of a public good. Consumers value this public good and are willing to pay a price premium to a firm which makes such a donation. When this price premium is sufficiently large, the firm can raise its net profits by pledging a portion of those profits to provision of the public good. This is more likely when the consumer's marginal valuation of contributions to the public good is high and when the firm (in the absence of donations) has a high ratio of fixed costs to operating profits. I also identify circumstances under which corporate social responsibility makes consumers worse off.     

Profitable Mergers in a Cournot Model of Spatial Competition

This paper investigates the profitability and locational effects of mergers when Cournot firms compete in spatially differentiated markets. A two-firm merger is generally profitable because the merged partners can coordinate their location decisions. The merged firm locates its plants outside the market quartiles with distance from the market center being an increasing function of the number of nonmerged firms remaining at the market center. Profitable two-firm mergers reduce competitive pressure, leading to higher prices and reduced consumer surplus. The merger increases total surplus by increased locational efficiency and the increased profits of the merged and nonmerged firms.     

Determinants of cross-border merger premia

Firms have a broad range of rationales for engaging in cross-border mergers and other forms of foreign direct investment (FDI); while some companies are in search of the cost advantages provided by foreign resources, other firms are primarily interested in gaining access to new markets. Although a significant amount of research has explored the patterns of FDI, little work has been done to assess what influences the value of cross-border mergers and, in particular, what determines why some cross-border mergers are expected to result in higher synergies when compared to others. This paper explores what characteristics of a merger are expected to increase the synergies that a firm will accrue from a cross-border merger by testing how a variety of factors impact the premia paid to effectuate a cross-border merger. We find that firms are willing to pay a higher premium to obtain greater control over foreign firms, and that this control is even more important in mergers involving firms in emerging markets. We also find that the factors affecting deal premia in cross-border mergers differ based on whether the acquirer has a high or low intangible asset intensity level.     

企业并购后整合对创新影响的实证研究——基于资源整合产生协同效应角度的分析

文章研究了企业合并后资源整合效果对创新的影响。选取了信息技术行业129个样本进行了实证检验,结果表明,信息系统整合、文化整合和技术整合产生的经营协同效应以及战略整合产生的管理协同效应都对企业的创新产生显著的正向影响;财务协同效应和一些企业运营方面的协同效应对创新没有非常显著的正向作用。因此,企业在实现合并后应加强资源整合,实现最大程度的协同效应,特别是合并为了增强创新能力的企业,应加强信息系统、企业文化、技术和战略方面的整合。     

Acquirer Internal Control Weaknesses in the Market for Corporate Control

This paper examines how disclosures regarding internal controls, required by sections 302 and 404 of the Sarbanes‐Oxley Act of 2002 (SOX), affect the market for corporate control. We hypothesize that acquirers with internal control weaknesses (ICWs) make suboptimal acquisition decisions based on poor‐quality information generated by their ineffective controls over financial reporting. We expect that such acquirers will be more likely to misestimate the value of their targets or the potential synergies from mergers, thereby overpaying for completed deals. Using a treatment sample of acquisitions made by acquirers that have disclosed ICWs and two matched control samples without ICW disclosures, we document that ICW acquirers experience a substantially more negative market response to acquisition announcements and have lower future performance than the two matched control samples without ICW disclosures. Overall, our results suggest that ineffective internal controls hinder decision making related to mergers and acquisitions (M&A).     

初始领先优势和协同效应对企业竞争的影响研究

初始领先优势和协同效应对企业在市场竞争中的演化结果具有重要影响.文章通过建立企业间的协同演化动力学模型,既考虑企业与消费者之间的协同效应,又考虑企业与企业之间的协同效应,分析了企业的初始领先优势和协同效应对企业竞争的影响,结果表明企业在市场竞争中胜出或被淘汰并不取决于它是强者或是弱者,而取决于初始领先优势和协同效应,充分说明了市场竞争的复杂性和初始领先优势与协同效应的重要意义.在此基础上,根据初始领先优势和协同效应对企业的影响机理,提出企业在市场竞争的对策建议.     

Firm size and export performance

Economic analysis based on the Theory of the Firm shows that the exporting firm can be conceptualized as a discriminating monopolist, facing several demand curves. The analysis shows that under these conditions, and assuming certainty, the larger the firm, the higher the ratio of exports to total sales.When uncertainty is introduced into the model, the conclusion regarding the relationship between size and the ratio of exports to sales is reinforced. Large firms can afford to assume more risks than small ones; in addition, their risks from foreign operations are less than those of small firms because the large firms benefit from economies of scale in foreign marketing. Consequently, the risk premium demanded by large firms from foreign marketing is less than the premium insisted upon by small firms. Large firms therefore tend to export a higher share of their output. These theoretical constructs are confirmed by empirical analysis performed on a sample of several hundred firms from six industries in Denmark, Holland and Israel. The figures confirm, with few exceptions, that the size of firms is indeed positively correlated with the ratio of exports to sales.The normative conclusion which can be drawn from the above is that economic policy-makers who wish to increase the export potential of industrial firms, should adopt policies which will encourage large firms to come into being through mergers, take-overs or simply fast growth.     

Did mergers help Japanese mega-banks avoid failure? Analysis of the distance to default of banks

This paper applied the distance to default (DD) measure to five mergers among large Japanese banks during the crisis period. The DD helps us analyze whether mergers that took place in the late 1990s and 2000s made the merged banks financially more robust, as intended. Our findings include: (1) A merged bank fundamentally inherits financial soundness of premerged banks, without incremental value from the merger; and (2) A negative DD was observed following the merger. The findings of this case study are consistent with the view that large Japanese banks’ mergers either failed to implement intended scale economies or were motivated by a belief in the too-big-to-fail policy.     

Dimensions of entrepreneurial orientation and small and medium enterprise performance in emerging economies

The removal of trade barriers has encouraged the entry of new competitors into formerly protected markets. This situation creates pressure on many small and medium enterprises (SMEs) in emerging economies such as Tanzania. Using a survey method and cross-sectional research design, the research examines three dimensions of entrepreneurial orientation (EO), namely: pro-activeness, risk-taking and competitive aggressiveness. Understanding their relationships and variance may help to improve our ability to explain SME performance. The findings contribute to how SME performance in emerging economies can be enhanced to enable SMEs to face challenges posed by competitor influx in the context of an open market economy. The findings indicate a strong relationship between EO dimensions and performance, with risk-taking and competitive aggressiveness moderating the effect of pro-activeness. The proposed model could predict 72% of the variance explained in SME performance.     

The Impact of Litigation Risk on Auditor Pricing Behavior: Evidence From Reverse Mergers

We use reverse mergers to examine the impact of litigation risk on audit fees. In a reverse merger, a private company merges with a public company, and the private company's management takes over the resulting publicly traded firm. Reverse mergers create a unique test setting to provide estimates on the litigation risk premium because, while the litigation risk for formerly private firms whose equity becomes publicly traded increases, the remaining auditee‐ and auditor‐related characteristics remain virtually unchanged. We document a litigation risk premium of approximately 27 percent. Moreover, we document that equity dispersion impacts the audit fee pricing of litigation risk and this relation is dramatically magnified in the publicly traded realm. Finally, we find that institutional investors demand higher audit effort in the form of higher audit fees in both the private‐ and public‐equity settings.     

The long-term impact of mergers and the emergence of a merger wave in pre-World-War I Germany

Using annual data on mergers for 35 leading German companies from 1870 to 1913, my study tries to explain the first merger wave that emerged 1898. My panel probit model that accounted for economies of scale, macroeconomic conditions, success of former mergers, and market structure revealed that previous mergers made subsequent mergers more likely. The propensity to merge was higher for larger companies that increased their market power. In the banking industry, managers imitated mergers, although these mergers were not successful, and hence followed the minimax regret principle. Rational information-based herding caused the serial dependency of mergers in other industries.     

IPO relative difficulty,M&A option and size effect

Size effect in the Chinese stock market is huge from 2012 to 2017. We empirically identify a driving force behind the effect: M&A option caused by IPO and M&A policies changes. We show that the M&A frequency increases and the acquirers' market value deceases as the IPO relative difficulty rises, small firm premium is positively related to both IPO relative difficulty and M&A frequency, and among the listed firms that have stronger tendency to merge or acquire a private firm, size effect is significantly larger. These results hold when controlling reverse merger probability. In sum, we reveal a new mechanism: Compared with a large public firm, a small one is more likely to acquire a private firm with discount since both the acquired and the acquirer benefit more, so the stock price of a small firm contains a larger part of M&A option. This option value increases as IPO relative difficulty rises.