Now showing 1 - 2 of 2
  • Publication
    Method of payment and risk mitigation in cross-border mergers and acquisitions
    We argue that the method of payment in cross-border mergers and acquisitions (M&As) can mitigate country-level governance risk for the acquirer. We find a greater use of stock as the method of payment in cross-border deals involving targets from countries with high governance risk relative to that in the acquirer’s country. This increased use of stock in riskier cross-border deals is consistent with the optimal reaction of the acquirer to avoid overpayment, even though we also show that the use of stock (instead of cash) as the method of payment in cross-border deals is associated with a lower likelihood of deal completion. Furthermore, for more recent periods (i.e., after 2000) we show that the use of stock (cash) has increased (decreased) significantly in cross-border deals, resulting in convergence with the method of payment used in domestic deals.
    Scopus© Citations 47  1455
  • Publication
    The sources of value destruction in acquisitions by entrenched managers
    Prior work has established that entrenched managers make value-decreasing acquisitions. In this study, we determine how they destroy that value. Overall, we find that value destruction by entrenched managers comes from a combination of factors. First, they disproportionately avoid private targets, which have been shown to be generally associated with value creation. Second, when they do buy private targets or public targets with blockholders, they tend not to use all-equity offers, which has the effect of avoiding the transfer of a valuable blockholder to the bidder. We further test whether entrenched managers simply overpay for good targets or choose targets with lower synergies. We find that while they overpay, they also choose low synergy targets in the first place, as shown by combined announcement returns and post-merger operating performance.
    Scopus© Citations 209  2216