Target Company Cross‐border Effects in Acquisitions into the UK

We analyse the abnormal returns to target shareholders in cross‐border and domestic acquisitions of UK companies. The cross‐border effect during the bid month is small (0.84%), although cross‐border targets gain significantly more than domestic targets during the months surrounding the bid. We find no evidence for the level of abnormal returns in cross‐border acquisitions to be associated with market access or exchange rate effects, and only limited support for an international diversification effect. However, the cross‐border effect appears to be associated with significant payment effects, and there is no significant residual cross‐border effect once various bid characteristics are controlled for.     

The Impact on UK Acquirers of Domestic, Cross‐border, Public and Private Acquisitions

Abstract:   We examine the announcement and post‐acquisition share returns of UK acquirers in over 4,000 acquisitions of domestic, cross‐border, public and private targets. Domestic public acquisitions result in negative announcement and post‐acquisition returns, whilst cross‐border public acquisitions result in zero announcement returns and negative post‐acquisition returns. In contrast, both domestic and cross‐border private acquisitions result in positive announcement returns and zero post‐acquisition returns. The main differences between private and public acquisitions are that glamour acquirers underperform in public acquisitions but not in private acquisitions, and that acquirers using noncash methods of payment underperform in domestic public acquisitions but not in domestic private acquisitions. Overall, cross‐border acquisitions result in lower announcement and long run returns than domestic acquisitions. In cross‐border acquisitions, those involving high‐tech firms perform relatively well, as do those with low national cultural differences.     

The Market for Corporate Control and the Agency Paradigm

The paper analyzes the role of agency driven takeover activity. The analysis shows that takeovers can play an important role in reducing agency costs even though the gains from the corporate restructuring that follows the takeovers are zero, which counters existing models of agency driven takeover activity. The model can therefore form the basis for deriving empirical predictions which discriminate between the agency paradigm and the corporate restructuring paradigm of takeover activity. Negative post-merger performance (Agrawal et al., 1992), which is inconsistent with corporate restructuring is consistent with this model, and that takeover targets' investment levels are below or at the average (Servaes 1994), which is inconsistent with the free cash flow theory is also consistent with this model.     

The Market for Corporate Control and the Agency Paradigm

The paper analyzes the role of agency driven takeover activity.The analysis shows that takeovers can play an important rolein reducing agency costs even though the gains from the corporaterestructuring that follows the takeovers are zero, which countersexisting models of agency driven takeover activity. The modelcan therefore form the basis for deriving empirical predictionswhich discriminate between the "agency paradigm" and the "corporaterestructuring paradigm" of takeover activity. Negative post-mergerperformance (Agrawal et al., 1992), which is inconsistent withcorporate restructuring is consistent with this model, and thattakeover target's investment levels are below or at the average(Servaes 1994), which is inconsistent with the free cash flowtheory is also consistent with this model. JEL numbers: G14,G31, G32, G34.     

The Performance of the European Market for Corporate Control: Evidence from the Fifth Takeover Wave

This paper presents an in‐depth analysis of the performance of large, medium‐sized, and small corporate takeovers involving Continental European and UK firms during the fifth takeover wave. We find that takeovers are expected to create takeover synergies as their announcements trigger statistically significant abnormal returns of 9.13% for the target and of 0.53% for bidding firms. The characteristics of the target and bidding firms and of the bid itself are able to explain a significant part of these returns: (i) deal hostility increases the target's but decreases bidder's returns; (ii) the private status of the target is associated with higher bidder's returns; and (iii) an equity payment leads to a decrease in both bidder's and target's returns. The takeover wealth effect is however not limited to the bid announcement day but is also visible prior and subsequent to the bid. The analysis of pre‐announcement returns reveals that hostile takeovers are largely anticipated and associated with a significant increase in the bidder's and target's share prices. Bidders that accumulate a toehold stake in the target experience higher post‐announcement returns. A comparison of the UK and Continental European M&A markets reveals that: (i) the takeover returns of UK targets substantially exceed those of Continental European firms. (ii) The presence of a large shareholder in the bidding firm has a significantly positive effect on takeover returns in the UK and a negative one in Continental Europe. (iii) Weak investor protection and low disclosure in Continental Europe allow bidding firms to adopt takeover strategies enabling them to act opportunistically towards the target's incumbent shareholders.     

Effects of Executive Share Option Plans on Shareholder Wealth and Firm Performance: The Singapore Evidence

The main purpose of our paper is to study the institutional nature and characteristics of executive share option plans (ESOPs) in Singapore, a fast-growing economy and an important investment location in Asia. Our study provides an interesting comparison between the characteristics of ESOPs in Singapore and those in the US. Our paper also investigates the short-term market reaction to ESOP announcements and the long-run stock and operating performance of the sample firms following the adoption of the ESOPs. Results indicate weak evidence of a positive abnormal return on the days surrounding the announcement of the ESOPs. However, there is no evidence of long-term superior stock and operating performance for the ESOP firms relative to benchmarks. The lack of significant incentive effects for the sample firms reflects mainly the unique regulatory environment in Singapore.