The University of Southampton
University of Southampton Institutional Repository

The performance of acquisitions by high default risk bidders

The performance of acquisitions by high default risk bidders
The performance of acquisitions by high default risk bidders
We investigate the takeover strategies of high default risk acquirers and their value impact. We find that these bidders select bigger, less profitable and unrelated targets, pursue transactions during recessions, and pay with shares by offering target shareholders high premiums. Their long-term buy-and-hold returns are extremely negative, and reflect fundamentally their substantial drop in profitability combined with high leverage. We show that the well-established long-run underperformance of acquiring firms is largely driven by this sub-set of acquirers. The results are similar when we use alternative measures of default risk and performance, and a global sample of non-US bidders.
0378-4266
37-58
Bruyland, Evy
67b88c14-4a65-4acd-a6c1-c8ae82ff0b80
Lasfer, Meziane
592109e8-2b14-4ada-a892-9c16ba2c9a60
De Maeseneire, Wouter
56484723-2467-45c9-ad5d-5c015f7c2070
Song, Wei
0d91b8a3-694b-469e-a15e-bba82dc5d090
Bruyland, Evy
67b88c14-4a65-4acd-a6c1-c8ae82ff0b80
Lasfer, Meziane
592109e8-2b14-4ada-a892-9c16ba2c9a60
De Maeseneire, Wouter
56484723-2467-45c9-ad5d-5c015f7c2070
Song, Wei
0d91b8a3-694b-469e-a15e-bba82dc5d090

Bruyland, Evy, Lasfer, Meziane, De Maeseneire, Wouter and Song, Wei (2019) The performance of acquisitions by high default risk bidders. Journal of Banking & Finance, 101, 37-58. (doi:10.1016/j.jbankfin.2019.01.019).

Record type: Article

Abstract

We investigate the takeover strategies of high default risk acquirers and their value impact. We find that these bidders select bigger, less profitable and unrelated targets, pursue transactions during recessions, and pay with shares by offering target shareholders high premiums. Their long-term buy-and-hold returns are extremely negative, and reflect fundamentally their substantial drop in profitability combined with high leverage. We show that the well-established long-run underperformance of acquiring firms is largely driven by this sub-set of acquirers. The results are similar when we use alternative measures of default risk and performance, and a global sample of non-US bidders.

Text
ThePerformanceofAcquisitionsbyHighDefaultRiskBidders - Accepted Manuscript
Download (531kB)

More information

Accepted/In Press date: 21 January 2019
e-pub ahead of print date: 1 February 2019
Published date: 1 April 2019

Identifiers

Local EPrints ID: 433990
URI: http://eprints.soton.ac.uk/id/eprint/433990
ISSN: 0378-4266
PURE UUID: 8763b6b5-5eb2-4d13-9819-0654b3f49732

Catalogue record

Date deposited: 10 Sep 2019 16:30
Last modified: 28 Apr 2022 06:27

Export record

Altmetrics

Contributors

Author: Evy Bruyland
Author: Meziane Lasfer
Author: Wouter De Maeseneire
Author: Wei Song

Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton: eprints@soton.ac.uk

ePrints Soton supports OAI 2.0 with a base URL of http://eprints.soton.ac.uk/cgi/oai2

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.

×