Competition in the acquisition market and returns to bidders in Australia

Shams, Syed (2021) Competition in the acquisition market and returns to bidders in Australia. Research in International Business and Finance, 55:101339. pp. 1-21. ISSN 0275-5319


Abstract

This study investigates the impact of takeover market competition on the short-run market performance of Australian acquirers. While the market for corporate control predicts a positive association between takeover market competition and acquirers’ announcement period returns, the winner’s curse hypothesis predicts a negative relationship. Using six alternative proxies to capture acquisitions market competition, I find that takeover market competition has a significant negative influence on acquirers’ announcement period returns. However, this effect is more pronounced among private target acquirers, large acquirers and stock-financed acquisitions. The findings further reveal that large bidders acquiring private targets through stock-financed acquisitions are the most penalised group in the capital market in a competitive acquisitions market. Additionally, evidence is found which suggests that competition-induced bids are associated with significantly higher bid premiums and experience negative post-acquisition performance. The findings remain robust to the implementation of alterations to several methodological concerns, the issue of endogeneity and sample selection variations.


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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: 13 Oct 2020 06:16
Last Modified: 23 Apr 2021 05:58
Uncontrolled Keywords: Acquisitions; Takeover market competition; Private target acquirers, Public target acquirers; Cumulative abnormal return; Size effect
Fields of Research (2008): 15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150201 Finance
Identification Number or DOI: https://doi.org/10.1016/j.ribaf.2020.101339
URI: http://eprints.usq.edu.au/id/eprint/39880

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