Does takeover competition affect acquisition choices and bidding firm performance? Australian evidence

Faff, Robert and Gunasekarage, Abeyratna and Shams, Syed (2020) Does takeover competition affect acquisition choices and bidding firm performance? Australian evidence. Accounting & Finance, 60 (4). pp. 3581-3619. ISSN 0810-5391


Abstract

We examine the influence of takeover competition on three acquisition choices: (i) public versus private target acquisitions; (ii) stock versus cash financed acquisitions; and (iii) related versus unrelated acquisitions. We find strong evidence of acquirers’ preference for public targets, stock swaps and business focus, in the face of takeover competition. Further, we find that the takeover competition has a positive influence on the bid premium paid to acquirer public targets and those financed with stock issues; competitive bids offered to acquire related targets are associated with significantly low bid premiums. In the short‐term announcement window, competition‐induced bids to acquire public targets and those financed with stock are penalised by the capital market. However, only stock‐financed takeovers undertaken in a competitive takeover market show a long‐run decline in performance of acquirers.


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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Faculty/School / Institute/Centre: Historic - Faculty of Business, Education, Law and Arts - School of Commerce (1 Jul 2013 - 17 Jan 2021)
Faculty/School / Institute/Centre: Historic - Faculty of Business, Education, Law and Arts - School of Commerce (1 Jul 2013 - 17 Jan 2021)
Date Deposited: 15 Jun 2020 23:39
Last Modified: 14 Apr 2021 03:57
Uncontrolled Keywords: Acquisition choices; Long-run operating performance; Mergersand acquisitions; Short-term market performance; Takeover competition
Fields of Research (2008): 15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150201 Finance
Socio-Economic Objectives (2008): E Expanding Knowledge > 97 Expanding Knowledge > 970115 Expanding Knowledge in Commerce, Management, Tourism and Services
Identification Number or DOI: https://doi.org/10.1111/acfi.12527
URI: http://eprints.usq.edu.au/id/eprint/37820

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