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Takeover, Distress, and Equity Issuance: Evidence from Korea

Author

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  • Euna Cho

    (Economic Research Institute, Bank of Korea)

Abstract

We study the motive and the economic effects of takeover in Korea, which has not been actively studied due to difficulties in collecting data. Using the data of largest shareholder change disclosed in the Korea Exchange's public disclosure system in 2004-2017, we estimate logit regressions of the likelihood that the firms to be a target. We also estimate panel regressions to examine the effect of takeovers on financial performances. The results show that takeovers in Korea occur in relation to financial distress, and that some companies tend to be targeted repeatedly. However, after the takeover, the financial distress is not resolved, indicating poor performance of takeovers motivated by financial distress.

Suggested Citation

  • Euna Cho, 2019. "Takeover, Distress, and Equity Issuance: Evidence from Korea," Working Papers 2019-19, Economic Research Institute, Bank of Korea.
    • Handle: RePEc:bok:wpaper:1919
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    File URL: http://papers.bok.or.kr/RePEc_attach/wpaper/english/wp-2019-19.pdf
    File Function: Working Paper, 2019
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    More about this item

    Keywords

    Takeovers; Financial distress; Equity issuance; Financial Performance; Method of Takeover;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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