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Value Creation and Division of Gains in European Horizontal Acquisitions: The Role of Industry Conditions

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Author Info

  • Huyghebaert, Nancy

    (Katholieke Universiteit Leuven, 3000 Leuven, Belgium)

  • Luypaert, Mathieu

    ()
    (Hogeschool-Universiteit Brussel (HUB), Belgium)

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    Abstract

    This paper empirically investigates the industry determinants of M&A value creation and the division of M&A gains in a sample of horizontal acquisitions in Europe during the period 19972008. Our results show that industry sales concentration and the ratio of combined target and bidder size relative to the minimum efficient scale in the corresponding industry are significantly negatively associated with shareholder abnormal returns at deal announcement. The relation between industry sales growth and M&A value creation is U-shaped. Industry technological intensity and industry deregulation bear no significant association with M&A value creation, however. Finally, the data reveal that the division of M&A gains between target and bidder investors is determined by firm and deal characteristics rather than by industry conditions.

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    File URL: https://lirias.hubrussel.be/bitstream/123456789/3652/1/10HRP06.pdf
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    Bibliographic Info

    Paper provided by Hogeschool-Universiteit Brussel, Faculteit Economie en Management in its series Working Papers with number 2010/06.

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    Length: 44 page
    Date of creation: Jan 2010
    Date of revision:
    Handle: RePEc:hub:wpecon:201006

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    Web page: http://research.hubrussel.be
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    Related research

    Keywords: mergers and acquisitions; value creation; announcement return; industry conditions;

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    1. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
    2. Mara Faccio & Ronald W. Masulis, 2005. "The Choice of Payment Method in European Mergers and Acquisitions," Journal of Finance, American Finance Association, vol. 60(3), pages 1345-1388, 06.
    3. Eckbo, B Espen, 1985. "Mergers and the Market Concentration Doctrine: Evidence from the Capital Market," The Journal of Business, University of Chicago Press, vol. 58(3), pages 325-49, July.
    4. Hertzel, Michael & Smith, Janet Kiholm & Smith, Richard L, 2001. "Competitive Impact of Strategic Restructuring: Evidence from the Telecommunications Industry," Industrial and Corporate Change, Oxford University Press, vol. 10(1), pages 207-46, March.
    5. Gregor Andrade & Mark Mitchell & Erik Stafford, 2001. "New Evidence and Perspectives on Mergers," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 103-120, Spring.
    6. Powell, Ronan & Yawson, Alfred, 2005. "Industry aspects of takeovers and divestitures: Evidence from the UK," Journal of Banking & Finance, Elsevier, vol. 29(12), pages 3015-3040, December.
    7. Andrade, Gregor & Stafford, Erik, 2004. "Investigating the economic role of mergers," Journal of Corporate Finance, Elsevier, vol. 10(1), pages 1-36, January.
    8. Raquel Marin & Isabel Alvarez, 2009. "Technological effects of M&As in Spanish manufacturing," Industrial and Corporate Change, Oxford University Press, vol. 18(4), pages 761-784, August.
    9. Corrado, Charles J., 1989. "A nonparametric test for abnormal security-price performance in event studies," Journal of Financial Economics, Elsevier, vol. 23(2), pages 385-395, August.
    10. Kewei Hou & David T. Robinson, 2006. "Industry Concentration and Average Stock Returns," Journal of Finance, American Finance Association, vol. 61(4), pages 1927-1956, 08.
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