Motives for Acquisitions in the UK
AbstractThis paper investigates the motives for acquisitions in the UK. Standard event study methodology is inadequate to distinguish between different motives for acquisitions in any sample. Berkovitch and Narayanan (1993) propose a different methodology to distinguish between competing motives in any sample. This methodology analyses the relationship between the target gain and total gain to distinguish acquisitions driven by efficiency from those driven by agency motives. To differentiate managerial hubris from agency problems, the relationship between target gain and bidder gain is also analysed. The results show that efficiency is the primary motive for acquisitions exhibiting positive total gains. However, there is evidence of managerial hubris in the sample. In acquisitions were total gains are negative, agency problems are the primary motive.
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Bibliographic InfoPaper provided by Nottingham Trent University, Nottingham Business School, Economics Division in its series Working Papers with number 2004/1.
Date of creation: Jan 2004
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Web page: http://www.ntu.ac.uk/nbs
Acquisitions; event studies; efficiency; agency problems; managerial hubris.;
Find related papers by 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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