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Foreign Acquisitions and Managerial Discretion

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  • Yung, Kenneth K

Abstract

Foreign acquisitions have been growing dramatically since the 1980s despite academic studies showing that shareholders of acquirers generally do not realize any significant gain. In this paper, we investigate whether foreign acquisitions are motivated by managerial self-interest. Logistic regressions are performed to establish a link between foreign acquisitions and the acquirer's free cash flow. The results show that foreign acquisitions of low-Q firms are strongly influenced by managerial discretion. In addition, acquisitions of low-Q firms are conducted without consideration of the performance of the acquirers. Foreign acquisitions of high-Q firms, however, do not represent overinvestments. Copyright 2001 by Kluwer Academic Publishers

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  • Yung, Kenneth K, 2001. "Foreign Acquisitions and Managerial Discretion," Review of Quantitative Finance and Accounting, Springer, vol. 16(1), pages 53-63, January.
    • Handle: RePEc:kap:rqfnac:v:16:y:2001:i:1:p:53-63
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    Cited by:

    1. Hamish Anderson & Ben Marshall, 2007. "Takeover motives in a weak regulatory environment surrounding a market shock: a case study of New Zealand with a comparison of Gondhalekar and Bhagwat’s (2003) US findings," Review of Quantitative Finance and Accounting, Springer, vol. 29(1), pages 53-67, July.
    2. Ervin L. Black & Thomas A. Carnes & Tomas Jandik & B. Charlene Henderson, 2007. "The Relevance of Target Accounting Quality to the Long‐Term Success of Cross‐Border Mergers," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(1‐2), pages 139-168, January.
    3. Yun Meng & Ninon K. Sutton, 2017. "Is the grass on the other side greener? Testing the cross-border effect for U.S. acquirers," Review of Quantitative Finance and Accounting, Springer, vol. 48(4), pages 917-937, May.
    4. Agyenim Boateng & XiaoGang Bi & Sanjukta Brahma, 2017. "The impact of firm ownership, board monitoring on operating performance of Chinese mergers and acquisitions," Review of Quantitative Finance and Accounting, Springer, vol. 49(4), pages 925-948, November.

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