We study the influence of market signals and agency problems on the decision to cancel an announced acquisition. We find major differences between deals involving private vs. public targets. First, controlling for the value of expected synergies, acquisitions are less likely to be cancelled when the target is private rather than public. This finding supports learning rather than the alternative common-information hypothesis. Second, better manager-shareholder interest alignment makes the cancellation of a “bad” deal more likely only when the target is a private firm. This suggests bidder agency problems have a greater influence on acquisition outcome (i.e., learning) when the target is private. Third, cancellation is more likely for private targets when their post-announcement abnormal returns are low, especially if the method of payment includes stock. This indicates that it is important to control for bidder overvaluation when testing the managerial learning hypothesis. Overall, both the learning and agency hypotheses help explain observed differences in deal completion by target type.
Review of Quantitative Finance and Accounting – Springer Journals
Published: Sep 12, 2016
It’s your single place to instantly
discover and read the research
that matters to you.
Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.
All for just $49/month
Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly
Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.
Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.
Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.
All the latest content is available, no embargo periods.
“Hi guys, I cannot tell you how much I love this resource. Incredible. I really believe you've hit the nail on the head with this site in regards to solving the research-purchase issue.”Daniel C.
“Whoa! It’s like Spotify but for academic articles.”@Phil_Robichaud
“I must say, @deepdyve is a fabulous solution to the independent researcher's problem of #access to #information.”@deepthiw
“My last article couldn't be possible without the platform @deepdyve that makes journal papers cheaper.”@JoseServera