Synergy Motivation and Target Ownership Structure: Effects on Takeover Performance
نویسنده
چکیده
In this research, we find statistically significant positive abnormal returns around takeover announcements for combined firms. The cumulative average abnormal returns for combined firms are 4.62% over the event-window [-20, +20], which suggests that takeovers create shareholder wealth (synergy motive). In addition, we examine the impact of ownership structure in target firms on the abnormal returns to shareholders of combined firms. We show that management shareholdings have a significant negative impact on the returns to shareholders of combined firms (entrenchment). Institutional shareholdings and outside block holdings have a significantly positive influence on the abnormal returns to shareholder of combined firms. These results suggest that monitoring by large institutional shareholders and other outside shareholders increase the abnormal returns to shareholders of the combined firm. Furthermore, competition between bidders increases the abnormal returns to shareholders of combined firms. Competition between bidding firms might signal to high valuation bidders the availability of high, non-firm-specific synergistic gains. The positive relation between the market-to-book value of the target and the returns to shareholders of the combined firm indicate that the target firm has large growth opportunities, which will increase the value of the combined firm.
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