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Timings, terms and agency problems in mergers and acquisitions

Timings, terms and agency problems in mergers and acquisitions In this research, we analyse the timings, terms and agency problems in mergers and acquisitions where each firm optimally exercises its own exchange option and the timing and terms are determined endogenously. The theoretical analysis shows that the competition amongst the bidders will speed up merger and decrease the winning bidder's share in the post-merger firm; the agency problem will speed up or delay takeover. The managerial insights have been gained by the theoretical analysis. Keywords: real option; mergers and acquisitions; game theory; agency problem. Reference to this paper should be made as follows: Wang, Y. and Guo, P. (2015) `Timings, terms and agency problems in mergers and acquisitions', Int. J. Information and Decision Sciences, Vol. 7, No. 4, pp.287­311. Biographical notes: Yuanbin Wang is a doctoral student at Faculty of Business Administration of Yokohama National University. His research areas are asset pricing and M&A. Peijun Guo is a Professor of Decision Sciences in Faculty of Business Administration, Yokohama National University, Japan. He received his BE, ME and PhD in 1990, 1993 and 1996, respectively, all from Dalian University of Technology and the PhD in 2000 from Osaka Prefecture University majoring in industrial engineering. His research interests involve http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Information and Decision Sciences Inderscience Publishers

Timings, terms and agency problems in mergers and acquisitions

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Publisher
Inderscience Publishers
Copyright
Copyright © 2015 Inderscience Enterprises Ltd.
ISSN
1756-7017
eISSN
1756-7025
DOI
10.1504/IJIDS.2015.074130
Publisher site
See Article on Publisher Site

Abstract

In this research, we analyse the timings, terms and agency problems in mergers and acquisitions where each firm optimally exercises its own exchange option and the timing and terms are determined endogenously. The theoretical analysis shows that the competition amongst the bidders will speed up merger and decrease the winning bidder's share in the post-merger firm; the agency problem will speed up or delay takeover. The managerial insights have been gained by the theoretical analysis. Keywords: real option; mergers and acquisitions; game theory; agency problem. Reference to this paper should be made as follows: Wang, Y. and Guo, P. (2015) `Timings, terms and agency problems in mergers and acquisitions', Int. J. Information and Decision Sciences, Vol. 7, No. 4, pp.287­311. Biographical notes: Yuanbin Wang is a doctoral student at Faculty of Business Administration of Yokohama National University. His research areas are asset pricing and M&A. Peijun Guo is a Professor of Decision Sciences in Faculty of Business Administration, Yokohama National University, Japan. He received his BE, ME and PhD in 1990, 1993 and 1996, respectively, all from Dalian University of Technology and the PhD in 2000 from Osaka Prefecture University majoring in industrial engineering. His research interests involve

Journal

International Journal of Information and Decision SciencesInderscience Publishers

Published: Jan 1, 2015

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