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Acquisitions of financially constrained targets

Acquisitions of financially constrained targets
Acquisitions of financially constrained targets
We examine the extent to which bidders’ stock returns at acquisition announcements reflect the financing needs of the target firm. We find that bidders of financially constrained targets pay lower acquisition premiums and earn higher announcement period cumulative abnormal returns than bidders of unconstrained targets. The lower premium and positive stock market reaction are both sources of value for bidders’ shareholders. Our results contrast the findings of the literature that document an insignificant wealth transfer to bidder shareholders.
868-877
Mohamad, Maslinawati
2d3eef34-f833-4098-8fe0-714ad8e8a79e
Jory, Surendranath
2624eb24-850a-48f6-b3c6-c96749b87322
Madichie, Nnamdi
ca5d7279-5678-42ce-a923-21e005876b94
Mohamad, Maslinawati
2d3eef34-f833-4098-8fe0-714ad8e8a79e
Jory, Surendranath
2624eb24-850a-48f6-b3c6-c96749b87322
Madichie, Nnamdi
ca5d7279-5678-42ce-a923-21e005876b94

Mohamad, Maslinawati, Jory, Surendranath and Madichie, Nnamdi (2018) Acquisitions of financially constrained targets. The Journal of Social Sciences Research, (5), 868-877. (doi:10.32861/jssr.spi1.1.10). (In Press)

Record type: Article

Abstract

We examine the extent to which bidders’ stock returns at acquisition announcements reflect the financing needs of the target firm. We find that bidders of financially constrained targets pay lower acquisition premiums and earn higher announcement period cumulative abnormal returns than bidders of unconstrained targets. The lower premium and positive stock market reaction are both sources of value for bidders’ shareholders. Our results contrast the findings of the literature that document an insignificant wealth transfer to bidder shareholders.

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Accepted/In Press date: 27 November 2018

Identifiers

Local EPrints ID: 426680
URI: http://eprints.soton.ac.uk/id/eprint/426680
PURE UUID: 9c15f8c4-f3b8-45b6-861c-928b858af5d2
ORCID for Surendranath Jory: ORCID iD orcid.org/0000-0002-8265-0001

Catalogue record

Date deposited: 10 Dec 2018 17:31
Last modified: 12 Dec 2021 09:16

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Contributors

Author: Maslinawati Mohamad
Author: Nnamdi Madichie

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