Network centrality and mergers

Network centrality and mergers We hypothesize that the more central a firm in the customer–supplier network the lower is its returns from an acquisition. We find that the acquirers’ announcement day abnormal returns decline if the acquirer is more central in the network. Additionally, the target’s premiums decline if the target is more central in the network. Lastly, we also find that conditioned on the acquirer’s centrality, the acquirer’s announcement day abnormal returns increase if more information is available about the target. The centrality of the firm represents information availability of the firm. Thus, information availability may lead to a decline in acquisition returns. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals
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Publisher
Springer US
Copyright
Copyright © 2013 by Springer Science+Business Media New York
Subject
Economics / Management Science; Finance/Investment/Banking; Accounting/Auditing; Econometrics; Operations Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-013-0411-7
Publisher site
See Article on Publisher Site

Abstract

We hypothesize that the more central a firm in the customer–supplier network the lower is its returns from an acquisition. We find that the acquirers’ announcement day abnormal returns decline if the acquirer is more central in the network. Additionally, the target’s premiums decline if the target is more central in the network. Lastly, we also find that conditioned on the acquirer’s centrality, the acquirer’s announcement day abnormal returns increase if more information is available about the target. The centrality of the firm represents information availability of the firm. Thus, information availability may lead to a decline in acquisition returns.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Nov 14, 2013

References

  • The relationship between underinvestment, overinvestment and CEO’s compensation
    Baxamusa, M
  • Do termination provisions truncate the takeover bidding process?
    Boone, A; Mulherin, J

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