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What drives corporate minority acquisitions around the world? The case for financial constraints

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  • Liao, Rose C.

Abstract

In this paper, I examine minority block acquisitions from 1990 to 2009, as well as possible theories for the presence of equity stake purchases. I find that target firms are financially constrained. Acquisitions significantly increase their stock prices at announcement, along with their investment expenditures afterwards. In the two years following the acquisition, 27% (9%) issue new equity (debt) and raise 27% (24%) of their market capitalization. These findings support the theory that equity stakes certify the investment opportunities of target firms. I also find some support for the contracting motive, mostly in countries with good investor protection and a well-performing banking sector.

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  • Liao, Rose C., 2014. "What drives corporate minority acquisitions around the world? The case for financial constraints," Journal of Corporate Finance, Elsevier, vol. 26(C), pages 78-95.
    • Handle: RePEc:eee:corfin:v:26:y:2014:i:c:p:78-95
    DOI: 10.1016/j.jcorpfin.2014.02.007
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    Cited by:

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    More about this item

    Keywords

    Minority acquisitions; Financial constraints; Product market relations; Corporate governance;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • F3 - International Economics - - International Finance

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