Categorization of mergers and acquisitions using transaction network features

Mergers and acquisitions (M&A) have occurred among tens of thousands of companies. Categorization of M&A is important to both corporate strategy and academic research. Previous research largely uses case studies and econometric data analysis to classify the motivations and types of M&A. Here, we propose understanding M&A using large-scale data to generate more applicable and generalized results. We use transaction relationships from transaction networks to better understand M&A. Based on detailed pre-analysis, including matching M&A and transaction data from Japan and clustering of transaction networks, we select several M&A observation perspectives. We use two features of transaction networks to categorize M&A cases: betweenness centrality and shortest path length. Betweenness centrality provides a view of the overall business situation from a macro perspective, and shortest path length helps to understand neighboring business environments from a micro perspective. We find several meaningful areas of concentration based on their betweenness centrality values and shortest path lengths. Finally, we re-examine M&A cases in each area, summarizing the trends identified using this categorization method. This study contributes to the M&A literature because it advances quantitative categorization of M&A cases.     

Mergers and acquisitions in the financial industry: A bibliometric review and future research directions

The growing application of bibliometric reviews in Finance, as well as the ongoing consolidation processes across firms and countries, motivated this study on mergers and acquisitions (M&A) in the Financial Industry. From a starting count of around 4500 papers, we refine our database accordingly to keywords and journal quality, reviewing a final sample of 174 papers. By combining bibliometric and content analysis, we identify leading journals, countries, institutions, authors, articles, and related research questions that mostly contributed to this field. Moreover, we provide a keyword/cartographic analysis identifying five leading research streams and their evolution over time, that we extensively discuss. Finally, we summarize the main questions proposed by the literature as a suggestion for future research.     

Efficiency in the Vietnamese banking system: A DEA double bootstrap approach

This study analyses bank efficiency in Vietnam from 1999 to 2009. We use a unique data sample that allows us to capture the development of the Vietnamese banking sector over the last decade. We apply an advanced methodological approach introduced by Simar and Wilson (2007) to examine bank efficiency in Vietnam. An integral part of the analysis is to explore the determinants of bank efficiency. The results indicate that large and very large banks are more efficient than small and medium sized banks with small banks having the lowest efficiency scores in the system. Non-state owned commercial banks are more efficient than state owned commercial banks assuming overall efficiency. We also argue that banks with large branch networks and those that have been in existence for a long time are less efficient than other banks.     

Intellectual capital disclosures by South African companies: A longitudinal investigation

Most of the previous studies on intellectual capital disclosures have been conducted from developed countries' context. There is very limited empirical evidence in this area from the context of emerging economies in general and Africa in particular. This paper is one of the early attempts in this regard. The main purpose of this study is to examine the extent and nature of intellectual capital disclosures in ‘Top 20’ South African companies over a 5 years period (2002–2006). The study uses content analysis method to scrutinise the patterns of intellectual capital disclosures during the study period. The results show that intellectual capital disclosures in South Africa have increased over the 5 years study period with certain firms reporting considerably more than others. Out of the three broad categories of intellectual capital disclosures human capital appears to be the most popular category. This finding stands in sharp contrast to the previous studies in this area where external capital was found to be most popular category.     

Mergers and acquisitions research in finance and accounting: Past,present, and future

This study presents an analysis of publication patterns and major themes in research on mergers and acquisitions in finance and accounting. We find that takeovers as mechanisms of governance, drivers of mergers, mechanisms of mergers, bank mergers, cross-border mergers, shareholder wealth effects of mergers and related events, and the role of financial experts and ownership structure form major themes of research in the finance area, while in accounting area major themes are corporate governance and accounting outcomes, predicting takeovers and their outcomes, valuation, financial reporting and takeover decisions, and financial reporting and performance.     

Bank mergers and acquisitions in emerging markets: evidence from Asia and Latin America

Following a global wave of consolidation in the banking industry, this study analyses 132 mergers and acquisitions (M&As) involving banks in emerging markets in Asia and Latin America between 1998 and 2009. An event study measures the change in shareholder value for acquirers and targets; and a multivariate regression identifies the drivers of the change in shareholder value for acquirers. On average M&As create shareholder value for target firms, while acquirer firms do not lose shareholder value. Geographical diversification creates shareholder value for acquirers. Acquirer shareholders benefit from the acquisition of underperforming targets; from transactions settled by cash rather than exchange of equity; and from government-instigated M&A transactions.     

Shareholder voting in mergers and acquisitions: evidence from the UK

This paper examines the determinants and consequences of shareholder voting on mergers and acquisitions using a sample of resolutions approved by shareholders of UK publicly listed firms from 1997 to 2015. We find that dissent on M&A resolutions is negatively related to bidder announcement returns and positively related to shareholders’ general dissatisfaction towards the management. Shareholder dissent is an important predictor of the announcement returns of subsequent M&A deals. We also report an increase in shareholder dissent after the 2007–2008 financial crisis.     

Information dissemination on intellectual capital in mergers and acquisitions: purchase price allocations,press releases and business press

In order to reduce information asymmetries in relation to a firm's current decisions and long-term strategy, firms must consistently provide information to stakeholders. This paper investigates intellectual capital (IC) information disclosed in mergers and acquisitions (M&A) provided through three different disclosure channels (voluntary press releases, related newspaper articles and subsequent mandatory corporate disclosures in the notes to the financial statements). For a sample of 215 randomly selected US and European M&As, we analyse 215 press releases, 1025 newspaper articles and 215 purchase price allocations. Our findings suggest that IC disclosure in press releases is not perceived as informative and qualitative forward-looking IC information in voluntary corporate disclosures appears to lack credibility. Moreover, we empirically demonstrate interdependencies across the three disclosure channels. The business press seems to filter IC information provided in press releases. The amount of IC disclosure in the notes to the financial statements is positively associated with prior IC disclosure in newspaper articles, but negatively associated with IC disclosure in press releases. The managements of acquirer firms appear to pay attention to news coverage and public opinion. However, both voluntary and mandatory corporate disclosures appear to substitute rather than complement each other.     

Acquiring control in emerging markets: Foreign acquisitions in Eastern Europe and the effect on shareholder wealth

This paper examines stock market reaction to cross-border acquisition announcements that involve Eastern European emerging-market targets. Using a unique and a manually collected dataset, we identify 125 cross-border acquisitions in which developed-market firms from France, Germany, Netherlands, and the United Kingdom acquire ownership stakes in emerging as well as developed-markets in Europe during the period January 2000 through December 2011. In line with previous findings on foreign cross-border merger and acquisitions (M&As) in emerging-markets, evidence suggests that when the target firm is located in either the Czech-Republic, Hungary, Poland, or Russia, cumulative abnormal return (CAR) to the acquiring developed-market firm shows a statistically significant increase of 1.26% over a three day event window, following the announcement. Thereby, the relative size of the acquirer to the target appears to be the only significant factor that contributes to positive acquirer returns. The result is robust to the inclusion of controls for country, industry, as well as acquirer, target, and firm specific characteristics. Moreover, cross-border M&As involving an emerging-market target result in higher value creation for the acquiring shareholders than cross-border transactions into developed-markets.     

The Emerging Role of the European Commission in Merger and Acquisition Monitoring: The Boeing–McDonnell Douglas Case

The object of this study is to evaluate the consequences of the application of the EEC Regulation 4064/89 to non–European companies. We focus on the Boeing–McDonnell Douglas merger case, one of the first non–European mergers considered by the Commission. The analysis of abnormal returns on the two securities shows that the threat of a ban of the merger by the Commission were not perceived as credible at first. But when Boeing decided to ask the support of the American government, just after the decision of the European Commission to extend its investigations to the long term exclusivity contracts, the role of the Commission emerged.     

The change in the value relevance of accounting information after mergers and acquisitions: evidence from the adoption of SFAS 141(R)

This study examines how and why investors change the use of their information sources in valuation between book value and earnings after mergers and acquisitions (M&A) in both pre- and post-SFAS 141(R) periods. We find that investors generally put less weight on earnings but more weight on book value after M&A than before M&A, and that such a change is particularly strong after the adoption of SFAS 141(R). By looking at goodwill, other intangible assets and other balance sheet accounts that SFAS 141(R) amended, we further find that SFAS 141(R) improves the value relevance of book value components after M&A.     

Financial nexus: Efficiency and soundness in banking and capital markets

Based on a modified version of the model used in Corvoisier and Gropp (2002) and De Guevara et al. (2005), we argue that banks' soundness, the structural characteristics and efficiency of the banking sector along with the development of the capital markets constitute a financial nexus. For a data set of 63 developed and developing countries, we find evidences that efficiency significantly modulates the linkages between concentration and soundness. We also find that capital markets' development supports a stable evolution in banking sector. For the relationship between capital markets and soundness, our findings appear to be robust for various measures of the considered variables as well as for different estimation techniques. Regarding the impact of the concentration upon soundness, the results obtained display a certain sensitivity about the way concentration is measured.     

Posterior analysis of mergers and acquisitions in the international financial market: A re-appraisal

Do mergers and acquisitions (M&A) improve the wealth status of investors, and if so, amidst persistence of volatility shocks? This paper tests these propositions by employing in the first step, a modified event study approach, and estimating a long-memory conditional volatility model, in the second step. The financial and policy implications of M&A are varied and contestable, yet, from an investor’s perspective, the long-term adjusted gain from M&A depends not only on the immediate growth of wealth, but also the fact that such a growth would accompany reduced rate of volatility persistence. Although in the beginning, a high persistence of volatility cannot be ruled out, its presence in the longer-run implies that the wealth gains from M&A are unstable, leading perhaps to a further collapse of both the merged/merger and acquired/acquiring firms. We estimate a long-memory Generalized Conditional Heteroscedasticity (GARCH) model with a Markovian transition for a number of international firms, specifically in Asia, to show in the first place, whether volatility shocks display differential memory in the pre- and post-M&A periods and whether the asymmetric high persistence is in the aftermath of M&A. Our results point at a significant ‘non-zero’ and positive gain for investors following M&A, but this is combined with greater volatility persistence.     

Early warning systems and systemic banking crises in low income countries: A multinomial logit approach

This paper estimates an early warning system (EWS) for predicting systemic banking crises in a sample of low income countries in Sub-Saharan Africa. Since the average duration of crises in this sample of countries is longer than one year, the predictive performance of standard binomial logit models is likely to be hampered by the so-called crisis duration bias. The bias arises from the decision to either treat crisis years after the onset of a crisis as non-crisis years or remove them altogether from the model. To overcome this potential drawback, we propose a multinomial logit approach, which is shown to improve the predictive power of our EWS compared to the binomial logit model. Our results suggest that crisis events in low income countries are associated with low economic growth, drying up of banking system liquidity and widening of foreign exchange net open positions.     

Investment in gold: A bibliometric review and agenda for future research

Significant surge in gold prices has attracted speculators, investors and intellectuals alike. Factors driving gold prices, the effectiveness of gold price predictions, the economic viability of gold mining, risk management using gold, and its comparisons against exchange rates and stock prices have been some of the consistent foci of researchers. Applying bibliometrics on 453 top articles published on gold between 1970 and 2021, we present a comprehensive overview of the academic discussions on one of the fast evolving research domains. Apart from identifying the publication and citation trends, we note seven intellectual clusters contributing to growth of the contemporary research identified as: dynamics of gold prices and its linkage with other asset prices, gold prices: forecasting and comparison, gold as an instrument for an inflation hedge, gold and currency market, economic policy and gold prices, role of gold in the global financial market, and expected value and volatility of gold.     

Sovereign and bank dependence in the eurozone: A multi-scale approach using wavelet-network analysis

This study establishes time–frequency networks of sovereign and bank contagion in the eurozone over the period 2009–2021. By applying discrete wavelet transformation, daily CDS premia of sovereigns and systemically important banks are decomposed into multi-horizon components to specify directed and dependence-weighted networks. Dynamic analysis shows that the network connectivity and the strength of the dependencies are significantly lower after the introduction of the European Banking Union in 2014. While the strength effect is pronounced across all time horizons, the network connectivity only reduces in the short and medium run. This provides evidence that the new regulatory framework promotes financial stability but is more effective in the short and medium horizons. The consideration of the COVID-19 pandemic as a real-life stress test confirms these findings as the strength of the dependencies keeps at significantly lower levels.     

Top management adoption of a locally driven performance measurement and evaluation system: A social network perspective

This paper traces the adoption process by top management of a performance evaluation system initiated by the financial controllers at the Research And Development site of a leading multinational company. The research puts forward that the success of the change efforts depends on the nature of relationships among the organizational members involved in the process. Because performance measurement and evaluation systems have notoriety for being controversial, the notion of trust, operationalized through strong ties, emerged as pivotal to reduce uncertainty during the change process and facilitate the introduction of the performance evaluation system. The research also points out that the structural position of financial controllers within organizational networks is an important aspect in the success/failure of implementing such problematic control systems. Also, the social network analysis used in this paper has proved to be a useful methodology for studying the relational patterns that occurred during the change process.     

Firms in Transition: A Review of the Venture Capital,IPO, and M&A Literature

A key area of research focuses on firms in transition, particularly those going public via initial public offerings, those growing via venture capital infusions, and acquirers and targets in merger and acquisition deals. In this article, we provide a review of research regarding firms in transition, with a primary focus on accounting‐related research. As part of our review we include key contributions both in the Canadian context and internationally, and discuss areas to be considered for future research.