Essays on the Impact of Antitrust Regulation on Corporate Mergers and Divestitures

A merger requires at least one of two separate yet equally important sets of negotiations. The first involves merging parties to discuss issues related to the terms of the merger, including target firm\u27s valuation. The second resolves disputes between the merging parties and the government regulatory agency over the potential anticompetitive impact of the merger. In the first essay, I investigate the probability of completing an acquisition deal conditional on the government approval by applying a nested logit model. My results support the findings of Eckbo (1985), Coate, Higgins, and McChesney (1990), and Coate (2005) that mergers that are expected to increase market concentration are more likely to be challenged by the government. Consistent with Officer (2003) and Bates and Lemmon (2003), I find that including target termination fees is significantly positively related to the probability of completion irrespective of whether the deal is challenged or not. However, I document that including target termination fees deters competitive bidding only if the deal was challenged and leads to higher bid premium to the target firm only if the deal was not challenged. Conditional on not being challenged, acquirer\u27s investment opportunities and the relative size of acquirer and target firms are significantly positively related to the probability of completion, while target investment opportunities and the existence of multiple bidders are significantly negatively related to the probability of completion. Conditional on the merger being challenged, acquirer\u27s investment opportunities and the existence of target termination fees are positively related to the probability of completion and only the existence of multiple bidders is negatively related to the probability of completion. In the second essay, I study the impact of asset sales on the firm\u27s focus level, information asymmetry, and operating performance. I find that following a merger facilitating asset sale the firm becomes more diversified, its information asymmetry increases, and its operating performance does not change while following a non merger related asset sale, the firm becomes more focused, its information asymmetry decreases, and its operating performance improves significantly

Ownership structure and agency costs: evidence from the insurance industry in Jordan

Purpose: This study investigated the impact of corporate ownership structure on agency costs in the insurance industry. Design/methodology/approach: The study sample included 23 insurance companies listed on the Amman Stock Exchange (ASE) from 2010 to 2019. Panel regression was used to account for the firm- and time-specific unobservable variables and system-GMM estimation was used to address endogeneity concerns. Findings: The results show that managerial ownership positively (negatively) affects selling, general and administrative (SG&A) expenses (assets turnover), implying that unmonitored managers engage in activities that serve their own interests rather than those of shareholders. The largest shareholder's ownership has no impact on agency costs, implying that the ownership of the largest shareholder is irrelevant. However, as the wedge between the percentage of capital owned by the largest shareholders and managers increases, SG&A expenses (efficiency ratio) decrease (increases), indicating that the existence of large non-management shareholders reduces agency costs. After accounting for the endogeneity problem, the impact of ownership structure on agency costs measured by asset turnover remains robust. Originality/value: To the best of the authors' knowledge, this study is the first to provide unique evidence and useful insights into the determinants of agency costs from a frontier market in the Middle East and North Africa (MENA), with a focus on the insurance sector. Additionally, this study uses a new measure of separation between ownership and control by calculating the wedge between managers' and large shareholders' ownership

Essays on the Impact of Antitrust Regulation on Corporate Mergers and Divestitures

A merger requires at least one of two separate yet equally important sets of negotiations. The first involves merging parties to discuss issues related to the terms of the merger, including target firm\u27s valuation. The second resolves disputes between the merging parties and the government regulatory agency over the potential anticompetitive impact of the merger. In the first essay, I investigate the probability of completing an acquisition deal conditional on the government approval by applying a nested logit model. My results support the findings of Eckbo (1985), Coate, Higgins, and McChesney (1990), and Coate (2005) that mergers that are expected to increase market concentration are more likely to be challenged by the government. Consistent with Officer (2003) and Bates and Lemmon (2003), I find that including target termination fees is significantly positively related to the probability of completion irrespective of whether the deal is challenged or not. However, I document that including target termination fees deters competitive bidding only if the deal was challenged and leads to higher bid premium to the target firm only if the deal was not challenged. Conditional on not being challenged, acquirer\u27s investment opportunities and the relative size of acquirer and target firms are significantly positively related to the probability of completion, while target investment opportunities and the existence of multiple bidders are significantly negatively related to the probability of completion. Conditional on the merger being challenged, acquirer\u27s investment opportunities and the existence of target termination fees are positively related to the probability of completion and only the existence of multiple bidders is negatively related to the probability of completion. In the second essay, I study the impact of asset sales on the firm\u27s focus level, information asymmetry, and operating performance. I find that following a merger facilitating asset sale the firm becomes more diversified, its information asymmetry increases, and its operating performance does not change while following a non merger related asset sale, the firm becomes more focused, its information asymmetry decreases, and its operating performance improves significantly

Regional entrepreneurial activity : the case of the Jordanian economy

Economic growth in Jordan must remain a worrying factor to policy-makers because of the problems posed by the already high and consistent unemployment rates. The fact that the national economy's recent economic (strong) performance failed to generate the employment opportunities sought by the rapidly expanding labour force, has brought about some real pressures for economic reforms including the promotion of the role of the private sector. Indeed, this commitment to the principle of economic liberalization by successive Jordanian governments has made the Jordanian private sector, at once, a major player, an instrumental actor, and a direct prime beneficiary of any expected economic benefits. For centuries, economists (and others) have tried to understand why some countries reflect strong economic growth, while others stagnate at low levels of output. This effort has led to the publication of many of theoretical papers. As expected, the theoretical effort on the determinants of economic growth has resulted in a wide range of empirical papers which examine the factors underlying economic growth. Based on various conceptual and methodological viewpoints, these studies have considered a myriad of explanatory variables including, for example, investment, innovation and Research and Development (R&D) activities, Foreign Direct Investment (FDI), institutions, openness to trade, financial development, and entrepreneurship. The primary objective of this research is to empirically examine the issue of regional entrepreneurship in Jordan. In more specific terms, this research examines two main issues: The first issue involves some comparisons between the different Jordanian regions in terms of the main variables which are covered by the 2009 Survey of Jordanian adults carried out by the Global Entrepreneurship Monitor (GEM). The second issue which concerns this paper is the identification of the determinants of regional entrepreneurship. Based on the empirical analyses, it is concluded that entrepreneurship in Jordan is lower than might be expected. In addition, while cultural attitudes are favourable, males are much more likely than females to become involved in entrepreneurial activity. Finally, based on the econometric analysis, the results indicate that while the density of entrepreneurship at the regional level reflects some significant differences, gender, fear of failure, required level of skills, and income are the most significant factors which impact entrepreneurial activity

Ownership structure and agency costs: evidence from the insurance industry in Jordan

Purpose: This study investigated the impact of corporate ownership structure on agency costs in the insurance industry. Design/methodology/approach: The study sample included 23 insurance companies listed on the Amman Stock Exchange (ASE) from 2010 to 2019. Panel regression was used to account for the firm- and time-specific unobservable variables and system-GMM estimation was used to address endogeneity concerns. Findings: The results show that managerial ownership positively (negatively) affects selling, general and administrative (SG&A) expenses (assets turnover), implying that unmonitored managers engage in activities that serve their own interests rather than those of shareholders. The largest shareholder's ownership has no impact on agency costs, implying that the ownership of the largest shareholder is irrelevant. However, as the wedge between the percentage of capital owned by the largest shareholders and managers increases, SG&A expenses (efficiency ratio) decrease (increases), indicating that the existence of large non-management shareholders reduces agency costs. After accounting for the endogeneity problem, the impact of ownership structure on agency costs measured by asset turnover remains robust. Originality/value: To the best of the authors' knowledge, this study is the first to provide unique evidence and useful insights into the determinants of agency costs from a frontier market in the Middle East and North Africa (MENA), with a focus on the insurance sector. Additionally, this study uses a new measure of separation between ownership and control by calculating the wedge between managers' and large shareholders' ownership

Firm value and investment policy around stock for stock mergers

Internal capital markets, Mergers, Diversification, G31, G32, G34,