Value creation and the probability of success in merger and acquisition transactions

This paper presents and tests a hypothesis that expands existing explanations of value creation in merger and acquisition (M&A) transactions. The main premise is that value creation is determined by not only the target’s pre-acquisition value, as indicated by numerous studies in extant literature, but also by the acquirer’s competency (among other factors) demonstrated by their pre-merger financial ratios. The paper shows that M&A transactions create value in the longer-run and the gain is commensurate with the acquirer’s historical performance and the target’s pre-acquisition value. Further, the paper employs statistical procedures and model-building techniques in order to develop and validate parsimonious Altman-style predictive models. The models reasonably identify successful M&A deals and are statistically significant and consistent with a few existing theories. Specifically, the evidence on liquidity supports internal capital markets hypothesis but does not support the theories of agency problems, while the evidence on financial leverage supports the view that lower debt enhances corporate control.     

FEER for the CFA franc

We investigate the behaviour of the real effective exchange rates (REER) of the two CFA franc zone monetary unions?–?CEMAC and WAEMU?–?vis-à-vis their long-run equilibrium paths. A reduced form of the Edwards’ (1989) fundamentals equilibrium exchange rate (FEER) model is estimated using the Johansen's (1995) cointegration methodology, and equilibrium paths and associated misalignments are derived for the period 1970 to 2005. Our results suggest that, for both CEMAC and WAEMU, the fundamentals account for most of the exchange rates’ fluctuation: increases in the terms-of-trade, government consumption and productivity tend to appreciate the exchange rate, while increases in investment and openness tend to depreciate it. At end of 2005, we find no evidence that either the CEMAC or WAEMU REERs were significantly over-valued, which suggests that no exchange rate action is currently needed. Our analysis also reveals significant differences in the fundamentals’ marginal impact, and speed of reversion to equilibrium following a shock, which may raise questions about the desirability of maintaining the same parity for both monetary unions.     

The integration of sustainability within value management practices: A study of experienced value managers in the GCC countries

The Gulf Cooperation Council (GCC) comprises the Kingdom of Saudi Arabia, the Kingdom of Bahrain, and the states of Kuwait, Oman, Qatar, and the United Arab Emirates. These countries are fairly similar in terms of socioeconomic, commercial, and infrastructural development. Disappointingly perhaps, their thriving construction industries continue to score poorly in terms of sustainability. Although value management (VM) has been proposed as a potential mechanism for delivering sustainable construction projects in some countries, this idea has not yet been widely put into practice around the world. The aim of this article is to investigate this potential in the GCC countries through interviewing 17 experienced value managers from the GCC. The primary conclusion, derived from the viewpoints of these value managers, is that such an endeavor might be unviable at present, largely due to a lack of awareness with regard to sustainability issues in the GCC. Proposals are therefore provided to assist in a successful integration of sustainability into VM practices in the GCC region.     

Investment appraisal practices: A comparative study of conventional and Islamic financial institutions

This paper compares the use of capital budgeting techniques of conventional and Islamic financial institutions, using data obtained from a survey of 105 conventional and Islamic financial institutions. Our main aim is to analyze the use of capital budgeting and risk techniques by the two types of financial institutions from a comparative perspective to see whether prohibition of riba makes a difference. Standard difference-of-means tests of the mean scores methods were used to test the hypotheses of the study. The results reveal a number of important conclusions. First, discounted cash flow techniques are found to be more widely used by financial institutions, and among those techniques internal rate of return is the most common. Second, Islamic financial institutions are found to adopt traditional methods that do not comply with the principles of Islamic Sharia'a. Third, a huge gap is found between the theory base of Islamic institutions and some of the practices of those institutions. Fourth, firms' characteristics, such as size, listing status, sources of revenue and government ownership, have some impact on their decisions to adopt capital budgeting criteria, methods of estimating costs of capital and risk. Finally, the decisions to select particular capital budgeting techniques, cost of capital estimation methods, and risk assessments are partly related to the characteristics of the chief financial officers.     

CLOE: a cross-lingual ontology enrichment using multi-agent architecture

ABSTRACT

This article proposes across-lingual ontology enrichment (CLOE) approach for enriching ontologies from amultilingual text or other ontologies. Athree-level hierarchical multi-agent model has been built, where each node is modelled as an agent. This has several advantages: ontologies can be used to enrich other ontologies in adifferent language, several ontologies can be enriched at the same time, and domain-independent. A prototype for the proposed approach has been implemented. Evaluation results are promising, showing considerable precision and recall scores. We believe that this approach is the first such attempt to enrich multiple ontologies using adomain-independent approach.     

Toward a complete definition of relatedness in merger and acquisition transactions

The interrelation between different sources of relatedness in M&A transactions has been largely overlooked in extant literature. This paper offers theoretical and empirical investigation and introduces a few new measures of relatedness. We find that single-dimensional measures of relatedness are complements, not substitutes, of each other, and their impacts on the market’s reaction are additive and interdependent. Specifically, each measure contains unique relatedness information and the market’s perception of, and reaction to, the presence of relatedness in M&A deals is more sophisticated than the extant literature prescribes. The market seems to reward operational and marketing relatedness in small-vicinity mergers and out-of-state mergers. In contrast, related in-state mergers seem to be associated with a significantly negative market reaction. Similarly, technology affiliation induces an additional positive market reaction that is separate from simple industry matching, and the market seems to reward the acquisition of high-technology targets by high-technology acquirers and to penalize the acquisition of high-technology targets by non-high-technology acquirers. Furthermore, we find that horizontally and vertically related mergers are relatively more likely to be completed, while in-state and large-vicinity mergers are less likely to be completed. We also find that when the target is incorporated in a target-friendly state, the merger is less likely to be completed, though state-specific merger laws do not contribute significantly to mergers’ valuation. Taken together, our results indicate that relatedness is a multidimensional metric composed of several interrelated components, and, thus, single-dimensional proxies are not sufficient to capture relatedness accurately and completely.

     

Renewable energy scenarios for major oil-producing nations: The case of Saudi Arabia

Renewable energy technologies are becoming internationally recognised as a vital contribution towards a sustainable energy future. Given that little research has examined the prospects of renewables from the perspective of major oil producers, this paper presents a set of renewable energy scenarios for the currently oil-rich Kingdom of Saudi Arabia. These scenarios have been developed using the Delphi technqiue, and represent a joint creation of thirty-five highly informed individuals from diverse backgrounds.     

Towards a functional framework for measuring national innovation efficacy

In an increasingly globalised economy, the ability to draw in innovations and ideas from elsewhere and build on them to create value at home has become a powerful facility for economic growth. Since some places are better at adopting and adapting borrowed ideas than others, the function of ‘innovation through adoption’ deserves more attention at both scholarly and policymaking levels. Based on such beliefs, this paper elaborates the notion of ‘innovation through adoption’ and develops it further to advance the notion of ‘innovation efficacy’. The latter is interpreted here as the efficiency and effectiveness of innovation systems in terms of accessing, anchoring, diffusing, creating and exploiting innovations. This notion is further illustrated in a measurement tool based on a composite index, which we name the ‘Innovation Efficacy Index’.The ultimate contribution of the paper lies in its aim to shift the traditional focus of attention from a fixation with developing and exploiting new knowledge locally to the prospect of value creation through accessing, anchoring or diffusing knowledge acquired from elsewhere.