Governance reform and IPO underpricing

Underpricing of IPOs in Thailand significantly drops following the country's major governance reform, indicating less price-protection by investors. The lower price-protection is associated with fewer instances of absolute control retention by pre-issue insiders during the post-reform period, not reduction in the expropriation risk. While corporate disclosure does not reveal issuers' true risk type before the reform, it does so after the reform. Yet, insiders make significantly less disclosure when retaining absolute control regardless of the reform. We conclude that governance regulation in an economy with fundamentally weak legal institutions works, but its efficacy is limited when insiders retain absolute control.     

Limited Information and the Sustainability of Unlisted-Target Acquirers' Returns

Abstract:  Relaxed disclosure requirements of unlisted firms, as compared to publicly listed companies, lead to limited quality and quantity of information at bid announcements, causing difficulty in valuing gains from mergers. This raises the question: are the frequently reported superior announcement-period gains to unlisted-target acquirers sustainable in the long run? Our results for the UK show that unlisted-target acquirers gain on announcement, but suffer a substantial loss in the long run. This reversal in fortune of unlisted-target acquirers is in sharp contrast to the performance of listed-target acquirers in the UK. Therefore, short-run gains for unlisted-target acquirers may result from investors' excessive optimism when faced with limited and biased information.     

The Euro and the Changing Face of European Banking: Evidence from Mergers and Acquisitions

During the last fifteen years, the European banking industry has experienced considerable consolidation through mergers and acquisitions against the background of the introduction of the single currency and reductions in cross‐border barriers. This paper investigates whether these changes impacted on announcement period gains of the banks acquiring targets by examining the pre‐euro, run‐up to the euro and post euro eras. Evidence suggests bidders' gains have fallen with the development of economic and monetary union. It also reveals significant differences in the gains from acquisitions within and outside the eurozone. These results are consistent with increased competition among bidders and increased integration of the market in the eurozone area in the post‐euro era. However, differing results relating to focused and diversifying bids suggest that the level of market integration is sector dependent.