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What determines takeover premia: An empirical analysis

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  • Simonyan, Karen

Abstract

We empirically analyze the determinants of takeover premia over the period of 1985–2005 and investigate four different factors affecting these premia over the sample period. Our results can be summarized as follows. First, takeover premia were affected by market misvaluation: they were higher during periods of investor pessimism and market undervaluation and were lower during periods of investor optimism and market overvaluation. Consistent with the above result, takeover premia were also negatively related to prior stock market return and positively related to stock market volatility. Second, takeover premia exhibited momentum, being positively correlated with the premia paid in other takeovers in the recent past. Third, takeovers which involved firms in regulated industries immediately prior to deregulation events were associated with significantly lower premia, while premia paid in takeovers which involved firms in deregulated industries after deregulation events were not significantly different from those in other industries. Finally, takeovers of firms in industries with excess capacity and too many firms (industries going through consolidation) commanded higher premia compared to takeovers in other industries.

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  • Simonyan, Karen, 2014. "What determines takeover premia: An empirical analysis," Journal of Economics and Business, Elsevier, vol. 75(C), pages 93-125.
    • Handle: RePEc:eee:jebusi:v:75:y:2014:i:c:p:93-125
    DOI: 10.1016/j.jeconbus.2014.07.001
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    4. Jost, Sébastien & Erben, Saskia & Ottenstein, Philipp & Zülch, Henning, 2022. "Does corporate social responsibility impact mergers & acquisition premia? New international evidence," Finance Research Letters, Elsevier, vol. 46(PA).
    5. Chistopher Day & Martin Bugeja & Helen Spiropoulos & Zoltan Matolcsy, 2023. "Non‐executive directorship importance and takeover hostility: Australian evidence," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(1), pages 769-793, March.
    6. Riccardo Ferretti & Pierpaolo Pattitoni & Roberto Patuelli, 2021. "Insider Trading and the Market Abuse Directive: Are Voluntary and Mandatory Takeover Bids Different?," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 7(3), pages 461-485, November.
    7. Hu, May & Mou, Jiayi & Tuilautala, Mataiasi, 2020. "How trade credit affects mergers and acquisitions," International Review of Economics & Finance, Elsevier, vol. 67(C), pages 1-12.
    8. Thraya, Mohamed Firas & Hamza, Taher, 2019. "Bidder excess control, target overpayment and control contestability: Evidence from France," The Quarterly Review of Economics and Finance, Elsevier, vol. 72(C), pages 178-190.

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    Keywords

    Takeover premia; Mergers and acquisitions; Market misvaluation; Deregulation; Industry consolidation;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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