Critical Success Factors through the Mergers and Acquisitions Process: Revealing Pre‐ and Post‐M&A Connections for Improved Performance

The mergers and acquisitions (M&A) literature is vast, spanning over half a century of research endeavor and drawing upon multiple disciplinary perspectives. Despite this wealth of material, the field suffers from a lack of connectedness. There is limited and compartmentalized understanding of the complexities of the M&A process, as the various streams of M&A research are only marginally informed by one another. As a result, the existing body of knowledge on M&A research remains fragmented. There is a need to establish links between existing approaches to M&A and the critical success factors they each promote. In this article, the need for a pluralistic and holistic explanatory framework that reflects the multidisciplinary nature of M&A is highlighted. The article shows that dynamic relationships between different perspectives on M&A and critical success factors matter. Identifying these relationships may help to further our understanding about M&A performance outcomes. Thus, the paper focuses on both relationships within each stage and between stages of the M&A process. © 2013 Wiley Periodicals, Inc.     

No more discount under enhanced fair value hierarchy

We use an integrated approach to analyse the reasons behind the discount on the balance-sheet fair value of illiquid financial instruments held by European banks and classified into the Level 3 Fair Value hierarchy under IFRS 7. We believe that the potential sources of misalignment are (1) the lack of disclosure, (2) earnings management, and (3) the lack of liquidity. We show that the discount implicit in market values is linked to the lack of mandatory additional disclosure required by IFRS 7 and that this result supports the strong enforcement activity made by national authorities.     

THE VALUATION OF NEW ZEALAND UNDERWRITING AGREEMENTS

Almost all cash issues by New Zealand listed public companies are by way of a rights issue. This paper examines the terms of 143 issues between 1976 and 1984. Of those issues 86 were underwritten and 57 were not. The paper is concerned with two questions. The first question examines whether there are fundamental differences in the terms of the issues that explain why some issues were underwritten and some were not. The second question examines the extent to which the underwriters' fee corresponds to the value of a put option, where that value is given by an adaptation of the Black Scholes formula. The conclusions are that there are differences in the terms of issues that are underwritten, compared with those that are not, and that the underwriters' fee is substantially in excess of the Black Scholes put value.     

Non-audit fees, long-term auditor–client relationships and earnings management

We examine whether auditor independence is affected by the amount spent on non‐audit services. Faster growth in non‐audit fees and longer time periods over which non‐audit services are purchased might reduce the auditor's independence from that client. Our results do not provide any support for a relationship between non‐audit fee growth rates or the length of time of the non‐audit fee relationship with the client and discretionary accruals, our measure of earnings management. We do find some evidence that the interaction of the non‐audit fee time‐period measures and client importance is positive and significantly related to discretionary accruals.     

Trade creating free trade areas and the undermining of multilateralism

This paper indicates that the consequences of regional trade agreements for the world trade system may be deceiving—an arrangement's apparent virtue may constitute the source of its drawback. In a model where governments have political, as well as economic, motivations, I show that a free trade area induces its members to reduce protection against the non-members, and to do so sufficiently deeply to generate overall trade creation. Trade creation amplifies the excluded countries’ access to the integrating markets, but also reduces their extra gains from multilateral liberalization. Thus, trade creation can reverse the support of the excluded countries to liberalization on a multilateral basis. This is more likely to happen when governments outside the free trade area are more responsive to special interests.     

A Bayesian Efficiency Analysis of Angolan Banks

This article studied the technical efficiency of Angolan banks from 2005 to 2012 using a Bayesian stochastic frontier model. The intermediation approach to banking was adopted. The results revealed that Angolan banks were very efficient and that efficiency varies little among the banks analysed. Furthermore, the differences in efficiency between foreign banks, public banks, large‐sized banks and banks that belong to a local conglomerate were examined. It was concluded that the greatest efficiency was to be found in the case of foreign banks. Since size and conglomerate membership do not seem to lead to greater bank efficiency, it was proposed that Angolan policymakers should promote competition in the banking sector.     

The value relevance of brand valuation

The reports published by independent parties are often used to provide an estimation of brands due to the lack of literature and best practices regarding which brand valuation method is more value relevant and reliable than another. Over the last several years, brand valuation debate is growing in importance because of the need to provide a value of intangibles for different purposes. The purpose of this study is two-fold. First, we aim to understand whether brand valuation related to listed companies provided by three independent agencies is value relevant and therefore whether these brand valuations are taken into consideration by investors in their decision-making process. Second, we assess which of the three methods reflects the stock markets in a better way. We analyse a sample of 71 brands valuated by Interbrand, Brand Finance and BrandZ from 2013 to 2015. The results show that brand valuation provided by the independent agencies is value relevant; in addition, they reveal that the Brand Finance method, based on the royalty relief approach, is more value relevant than the others. This study contributes to the extant literature on value relevance by providing evidence on the impact of stock prices of brand agencies’ valuation.     

Emerging floaters: Pass-throughs and (some) new commodity currencies

In spite of early skepticism on the merits of floating exchange rate regimes in emerging markets, 8 of the 25 largest countries in this group have now had a floating exchange rate regime for more than a decade. Using parsimonious VAR specifications covering the period of floating exchange rates, this study computes the dynamics of exchange rate pass-throughs to consumer price indices. We find that pass-throughs have typically been moderate even though emerging floaters have seen considerable nominal and real exchange rate volatilities. Previous studies that set out to estimate exchange rate pass-throughs ignored changes in policy regimes, making them vulnerable to the Lucas critique. We find that, within the group of emerging floaters, estimated pass-throughs are higher for countries with greater nominal exchange rate volatilities and that trade more homogeneous goods. These findings are consistent with the pass-through model of Floden and Wilander (2006) and earlier findings by Campa and Goldberg (2005), respectively. Furthermore, we find that the Indonesian Rupiah, the Thai Baht and possibly the Mexican Peso are commodity currencies, in the sense that their real exchange rates are cointegrated with international commodity prices.