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Motives for partial acquisitions between firms in the spanish stock market

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  • Matilde Olvido Fernandez
  • Juan Samuel Baixauli
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    Abstract

    The paper analyses the motivations for inter-company investment on the Spanish Stock Market through the study of a sample of significant acquisitions reported to the CNMV (the Spanish Securities and Exchange Commission) by quoted firms. By analysing the sign of the cumulative abnormal returns (CAR) and of the correlations among the gains produced by the operation, an attempt is made to find out which motives predominate of the three most important ones suggested by the literature for takeovers: synergy, agency and hubris. Empirical evidence is presented that in the Spanish Stock Market the main motive for acquiring a holding is similar to synergy, especially in partial acquisitions with positive total gains. However, in the samples with negative total gains a main motive similar to hubris always appears. The analysis takes into account the size of the investment and distinguishes between the first report and subsequent ones. Results are similar to those obtained by other authors for takeovers in the US Stock Market, except that in this sample, agency motives do not appear clearly.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal The European Journal of Finance.

    Volume (Year): 9 (2003)
    Issue (Month): 6 ()
    Pages: 581-601

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    Handle: RePEc:taf:eurjfi:v:9:y:2003:i:6:p:581-601

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    Related research

    Keywords: partial acquisition; event study; seemingly unrelated regression; bootstrap simulations; correlation between gains;

    References

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    1. Barclay, Michael J & Holderness, Clifford G, 1991. " Negotiated Block Trades and Corporate Control," Journal of Finance, American Finance Association, American Finance Association, vol. 46(3), pages 861-78, July.
    2. Berkovitch, Elazar & Narayanan, M. P., 1993. "Motives for Takeovers: An Empirical Investigation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(03), pages 347-362, September.
    3. Spencer, Carolyn & Akhigbe, Aigbe & Madura, Jeff, 1998. "Impact of partial control on policies enacted by partial targets," Journal of Banking & Finance, Elsevier, vol. 22(4), pages 425-445, May.
    4. Mikkelson, Wayne H. & Ruback, Richard S., 1985. "An empirical analysis of the interfirm equity investment process," Journal of Financial Economics, Elsevier, Elsevier, vol. 14(4), pages 523-553, December.
    5. Malatesta, Paul H. & Thompson, Rex, 1985. "Partially anticipated events: A model of stock price reactions with an application to corporate acquisitions," Journal of Financial Economics, Elsevier, Elsevier, vol. 14(2), pages 237-250, June.
    6. Shleifer, Andrei & Vishny, Robert W., 1986. "Large Shareholders and Corporate Control," Scholarly Articles 3606237, Harvard University Department of Economics.
    7. Bradley, Michael & Desai, Anand & Kim, E. Han, 1988. "Synergistic gains from corporate acquisitions and their division between the stockholders of target and acquiring firms," Journal of Financial Economics, Elsevier, Elsevier, vol. 21(1), pages 3-40, May.
    8. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, Elsevier, vol. 3(4), pages 305-360, October.
    9. Hsieh, David A & Miller, Merton H, 1990. " Margin Regulation and Stock Market Volatility," Journal of Finance, American Finance Association, American Finance Association, vol. 45(1), pages 3-29, March.
    10. Hirshleifer, David & Titman, Sheridan, 1990. "Share Tendering Strategies and the Success of Hostile Takeover Bids," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(2), pages 295-324, April.
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    Cited by:
    1. Jansen,Thijs & Lier,Arie,van & Witteloostuijn,Arjen,van, 2004. "Strategic Delegation In Oligopoly: The Market Share Case," Research Memorandum 051, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).

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