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Factors Affecting the Market for Corporate Control: The Role of Excess Cash, Diversification, and Predation during Mergers and Acquisitions

In: Excess Cash Flow

Author

Listed:
  • Rahul Dhumale

Abstract

A a microeconomic level, the information value of a firm’s financial structure is relevant for its behaviour in takeovers and acquisitions; however, this information can be misused at great cost to the market. Consequently, takeovers and mergers could exact negative externalities on the market through short-termism, greater concentration of industry, and agency costs. This chapter examines the signalling effects of earnings retention and diversification on returns during acquisitive activities and considers the benefits and disadvantages of a more active market for corporate control within India at a macroeconomic level.

Suggested Citation

  • Rahul Dhumale, 2003. "Factors Affecting the Market for Corporate Control: The Role of Excess Cash, Diversification, and Predation during Mergers and Acquisitions," Palgrave Macmillan Books, in: Excess Cash Flow, chapter 6, pages 151-181, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-50951-1_6
    DOI: 10.1057/9780230509511_6
    as

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