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Financing Decisions And Signaling By Partially Acquired Firms

Author

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  • Aigbe Akhigbe
  • Jeff Madura
  • Carol Spencer

Abstract

It is well documented that financing decisions by firms can signal valuable information about that firm. Our goal is to determine whether financing decisions by firms can signal valuable information about large stakeholders who have a substantial investment in those firms. In particular, we focus on financing decisions by firms after they had been partially acquired to determine whether these decisions signaled information that affected the values of their corresponding partial acquirers. We find that some financing policies by partially acquired firms may not only signal valuable information about themselves, but may also signal valuable information about their corresponding partial acquirers. We also find that the magnitude of the signal for the partially acquired firm that enacts a financing policy is dependent on the degree of monitoring imposed by the respective partial acquirer. JEL classification: G14, G34

Suggested Citation

  • Aigbe Akhigbe & Jeff Madura & Carol Spencer, 2001. "Financing Decisions And Signaling By Partially Acquired Firms," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 24(1), pages 99-118, March.
    • Handle: RePEc:bla:jfnres:v:24:y:2001:i:1:p:99-118
    DOI: 10.1111/j.1475-6803.2001.tb00820.x
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    Cited by:

    1. Zhu, PengCheng & Jog, Vijay & Otchere, Isaac, 2011. "Partial acquisitions in emerging markets: A test of the strategic market entry and corporate control hypotheses," Journal of Corporate Finance, Elsevier, vol. 17(2), pages 288-305, April.
    2. Neelam Rani & Surendra S Yadav & P.K. Jain, 2015. "Impact of Mergers and Acquisitions on Shareholders’ Wealth in the Short Run: An Event Study Approach," Vikalpa: The Journal for Decision Makers, , vol. 40(3), pages 293-312, September.

    More about this item

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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