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

Listed author(s):
  • Liao, Rose C.
Registered author(s):

    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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    File URL: http://www.sciencedirect.com/science/article/pii/S0929119914000182
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    Article provided by Elsevier in its journal Journal of Corporate Finance.

    Volume (Year): 26 (2014)
    Issue (Month): C ()
    Pages: 78-95

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    Handle: RePEc:eee:corfin:v:26:y:2014:i:c:p:78-95
    DOI: 10.1016/j.jcorpfin.2014.02.007
    Contact details of provider: Web page: http://www.elsevier.com/locate/jcorpfin

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