The impact of corporate governance systems, economic conditions, and target value ambiguity on bidders' gains

The primary objective of this thesis is to investigate the effects of takeover bid announcements on the value of bidders that engage in domestic and cross-border acquisitions. The empirical chapters focus on three major Issues. They are: (a) the Implications of International variations in corporate governance systems, (b) the roles of market valuations, economic conditions and exchange rate changes, and (c) the effects of ambiguity in the valuation of unlisted targets, on the wealth of shareholders of bidding firms. Evidence from all chapters, while revealing that bidders' gains vary significantly with several firm and transaction specific characteristics, strongly confirm the deterministic power of the key Issues examined. Specifically, the findings discussed In chapter 3, not only confirm that bidders tend to enjoy higher short-run gains from acquisitions of (a) listed and subsidiary targets that based In civil-law countries and (b) stock financed acquisitions of targets that based in common-law countries, but they also suggest that bidders perform relatively better In the long-run when the targets are based In common-law countries. The results reported and discussed in chapter 4 show that bidders' shareholders enjoy higher announcement gains from domestic than from foreign takeovers only when the bid is announced during periods of low market valuation, high levels of economic growth, and weak effective exchange rate. On the contrary, acquisitions made during periods of high market valuation and strong effective exchange rate yield higher abnormal returns to shareholders of acquirers of foreign than domestic target firms. The results also confirm that whereas market valuations and the effective exchange rate have similar effects on bidders' post-merger performance, the effects of economic growth tend to reverse after three and five years following the bid announcement. Evidence discussed in the final empirical chapter (chapter 5) suggests that the gains of bidders engaged in acquisitions of unlisted targets are shaped by the degree of difficulty surrounding the valuation of these targets. Bidders' shareholders enjoy higher announcement gains when they acquire less value-ambiguous unlisted targets. Acquisitions of (a) mature and (b) large unlisted targets generate higher (lower) short-run (long-run) returns to shareholders of bidders. In addition, bidders of unlisted targets laden with intangible assets generate low short-run returns but perform better in the long-run. Overall, the findings of this thesis show that the gains of bidders based In the UK are not only affected by transaction and firm specific factors but also by the corporate governance system of the country In which the targets are based, the stock market conditions, economic situations and exchange rate movements at the time of bid announcement, as well as the difficulty Involved in valuing the targets

Incentive-compatible contracts in merger negotiations:The role of acquirer idiosyncratic stock return volatility

We show that the acquiring firm's idiosyncratic stock return volatility (sigma) is an important determinant of the selection and perceived valuation effects of earnouts in Mergers and Acquisitions (M&As). Earnout‐based M&As are more often announced by high‐sigma acquirers (nearly 40% of all earnout‐based M&As), yet the documented higher risk‐adjusted returns accrued to acquirers in earnout‐based M&As, relative to M&As settled in cash, stock or mixed payments (the earnout effect), appear in deals announced by low‐sigma acquirers (nearly 20% of all earnout‐based M&As). High‐sigma acquirers employing earnouts appear to break even, or even experience losses, relative to their counterparts employing single up‐front payments. These results are confirmed based on a quasi‐experimental design through which the earnout effect is measured in isolation. We argue that in M&As announced by high‐sigma acquirers, the earnout effect is potentially elusive due to the presence of an acquirer‐specific information revelation effect, resulting from the heightened extent of information asymmetry between (small) acquirers’ managers and outside investors. On the contrary, the use of earnouts in M&As announced by low‐sigma (large) acquirers, whereby the acquirer‐specific information revelation effect is likely negligible, sends a strong signal for value creation that also prevents investors from inducing a size‐related discount

Earnout financing in the financial services industry

This paper explores the effects of earnout contracts used in US financial services M&A. We use propensity score matching (PSM) to address selection bias issues with regard to the endogeneity of the decision of financial institutions to use such contracts. We find that the use of earnout contracts leads to significantly higher acquirer abnormal returns (short- and long-run) compared to counterpart acquisitions (control deals) which do not use such contracts. The larger the size of the deferred (earnout) payment, as a fraction of the total transaction value, the higher the acquirers' gains in the short- and long-run. Both acquirer short- and long-run gains increase when the management team of the target institution is retained in the post-acquisition period

Relationships between Urban Form and Travel Behaviour in Athens, Greece. A Comparison with Western European and North American Results

In Athens, a series of political events during the last two centuries influenced urban planning, resulting in a unique land use and transport system. In this paper, we examine their relationships in this uncommon system and compare them with those in Western European and North American cities. Data from Metro Development Study (1996) were employed in multiple regression models for Athens, while results from similar studies in Western cities were used as the basis for comparisons. The results for Athens show that residential density is a key factor influencing mainly modal split, whereas distance from city centre and the extent of road network mainly influence trip length and energy consumption by car. An interesting threshold of 200 persons/ha is identified, in which significant changes in travel behaviour occur. In contrast, “land use mix” appeared to have no effects on travel behaviour. The international comparisons revealed differences regarding the density threshold and the role of land use mix, while results concerning residential density, distance from city centre and socio-economic characteristics are in line with those from other European and American cities. The case of Athens adds to the notion that land use policies could constitute a tool for changing travel behaviour. However, urban form parameters, and their critical thresholds, may vary from country to country, especially among cities in Europe and America, which means that no universal standards can be adopted. Finally, it could be argued that in all cases, if more compact urban structures are adopted, more sustainable travel patterns will emerge

Seven dimensions of consumption

This thesis presents the development of the integrative, context-sensitive, and multi-dimensional Consumer Motivation Scale (CMS). The CMS is based on the three higher-order master goals of goal-framing theory: the gain goal (“to guard or improve one’s resources”), the hedonic goal (“to feel better right now”), and the normative goal (“to act appropriately”). Across three articles, nine empirical studies, and various product categories and consumption contexts, the dimensionality and situational variability of the master goals are examined. The emergent goal structure—consisting of the three gain sub-goals Value for Money, Quality, and Safety, the two hedonic goals Stimulation and Comfort, and the two normative goals Ethics and Social Acceptance—is demonstrated to be linked to corresponding consumption behaviors and preferences. The resulting 34-item measure draws on a broad range of research, from economics and marketing to social and environmental psychology, and takes the cognitive, context-dependent, and multi-dimensional nature of motivation into account, providing consumer researchers and practitioners with a more nuanced and psychologically accurate measure of consumer motivation. It should prove useful in standard marketing research, as well as in the development of tailored marketing strategies and the segmentation of consumer groups, settings, brands, and products

The role of real options in the takeover premia in mergers and acquisitions

This paper applies a real option framework to suggest that the takeover premia in mergers and acquisitions can be influenced by (a) the pre-bid ownership of target and (b) the real option characteristics of both acquirer and target firms. Our findings show that pre-bid ownership reduces the takeover premia, which is consistent with the argument that pre-bid ownership reduces information asymmetry. However, we find that the takeover premia is higher when both the acquirer and target firms exhibit real option capacity as measured by positive risk-return sensitivity. As a result, an acquirer with real option capacity is willing to pay higher takeover premia for an option embedded in the target firm